Bank of Israel officials strike a relatively dovish tone after the rate cut

ISRAEL - In Brief 04 Sep 2026 by Sani Ziv

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Bank of Israel officials strike a relatively dovish tone after the rate cut Following yesterday's 25bp rate cut to 3.25%, comments by Governor Amir Yaron and Deputy Governor Andrew Abir reinforced the relatively dovish message. Both emphasized that underlying growth is considerably more moderate than the headline GDP figures suggest. In an interview with Reuters, Abir described growth as “reasonable, but not fantastic” and indicated that further rate cuts remain possible if inflation continues to decline or the shekel appreciates further. These comments contributed to an initial weakening of the shekel following the rate decision, although most of the decline was subsequently reversed by the end of the week. Financial markets responded positively to the rate cut. From the close before the decision through the end of the trading week, both the TA-35 and the TA-125 gained 2.8%, while the yield on the government bond maturing in May 2037 remained broadly unchanged at around 4.0%. The stability in Israeli yields came despite the rise in U.S. Treasury yields to around 4.8%, amid concerns over inflation and fiscal deficits. The relatively dovish tone from Bank of Israel officials was also supported by the latest wage data, which point to a moderation in labor-cost pressures, as well as by the government's decision to reduce the fuel excise, although the impact of this measure on inflation is expected to be temporary.Wage growth moderates in July, supporting the Bank of Israel's rate cut According to the latest data, average nominal wages eased to 3.3% year-on-year from 7.7% in June. After adjusting for inflation, real wages rose by 1.8% year-on-year in July. According to the...