The Bank of Israel cut its interest rate for the first time in nearly two years today, dropping it 25 basis points to 4.25%. The Prime Rate now sits at 5.75%. Citing market conditions and economic activity recovering sharply in Q3, Bank of Israel Governor Amir Yaron told TV10 what was behind today’s decision.
Bank of Israel Governor Yaron said: The decision reflects controlled inflation at 2.5%, a tightening labor market, and seven consecutive months of declining home prices. But he added a warning: if the 2026 budget isn’t managed responsibly, expectations for further cuts will diminish.
Markets loved it. On Monday, Nov. 24, 2025, the TA-125 and TA-35 indices were up 1.53%, with the TA-90 up by 1.67%.
TASE VP of Trading Yaniv Pagot said,
“The local stock market has overcome the security tensions reported earlier today, and therefore the increases indicate a focus on the Bank of Israel’s interest rate decision and on market trends abroad. Among the sectoral indices…the TA Insurance index rose 4% and the TA Construction index rose 2.7%.”
Credit rating impact: S&P’s recent upgrade of Israel’s outlook from negative to stable (covered in our weekly brief) likely supported today’s market confidence alongside the rate cut.
Our take: The 0.25% cut confirms the easing cycle has started, but Yaron’s fiscal warning matters. The 2026 budget negotiations will determine whether next January brings another cut or a hold. Markets are pricing in optimism, but the government’s fiscal discipline will be the real test.
Next rate decision: January 5, 2026.
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Disclaimer: This brief is for informational purposes only and does not constitute investment advice. All data current as of the date and time of publication.