Reuters poll: All 14 economists expect Bank of Israel to lower key interest rate 25 bps next week

All 14 economists surveyed by Reuters expect the Bank of Israel to reduce its key interest rate by 25 basis points next week, bringing the benchmark rate to 3.75% from 4.0%. The central bank is set to announce its decision on Monday at 4 p.m. (1300 GMT). The anticipated cut follows a brief pause in rate reductions and reflects a combination of stable inflation, a strong shekel, and a sustained ceasefire with Iran. Annual inflation remained at 1.9% in April, within the government’s 1-3% target range. The Bank of Israel has previously cut rates in November and January but held them steady in February and March. Rate could fall to 1.7% within a year. Meanwhile, the country’s economy contracted by an annualized 3.3% in the first quarter due to the 40-day war with Iran. The budget deficit declined to 3.8% of GDP in April, supporting the case for a more accommodative monetary policy. The U.S. has warned of renewed conflict with Iran should it not abandon its nuclear program, but economists largely see this as unlikely to influence the central bank’s decision this month. The Bank of Israel’s staff forecasts two more rate cuts by early 2027 and economic growth of 3.8% in 2026.