The Bank of Israel cut its policy rate by 25 basis points to 3.25% at its September 1, 2026, meeting, defying a Reuters survey majority that expected no change. The move was the third consecutive reduction and fifth cut in the current easing cycle, bringing borrowing costs to their lowest level in roughly four years. July inflation stood at 1.5%, within the government’s 1%-3% annual target range, while shekel appreciation added downward pressure on prices. The central bank said future decisions would depend on inflation, economic activity, geopolitical uncertainty and fiscal developments. Deputy Governor Andrew Abir said further short-term cuts remained possible if price pressures stayed stable and the economy responded appropriately. Economic activity grew rapidly in the first half of 2026, though it appeared more moderate excluding production abroad, while labor conditions remained tight and geopolitical risks elevated.