Weekly macroeconomic update, November 17, 2025
This week’s market focus centered on two key releases: the October CPI and the Q3 GDP figures. Together, they offer an updated view of the economy’s post-war momentum and inflation environment ahead of the Bank of Israel’s November 24 rate decision. The GDP surged 12.4% (annualized) in Q3 as activity rebounded from the war-related shutdown in June, yet overall output remains 3%-4% below its long-term trend. The October CPI, published on Friday, rose 0.5% and kept annual inflation steady at 2.5%, with inflation gradually converging toward the midpoint of the target range (2%). The CPI is expected to fall to around 2% in January 2026 as the high January 2025 rate drops out of the annual calculation, and if the January 2026 index comes in low or even slightly negative, as expected. Labor-market data released this week also pointed to continued strength, with job vacancies hitting a record high and unemployment remaining at just 3.0%.
The rapid rebound in Q3 growth, alongside strong wage data (showing nearly 5% annual increases), improving consumer sentiment and a persistently tight labor market, supports a cautious approach by the Bank of Israel. We expect a 25bp rate cut at the November 24 MPC meeting, followed by another reduction in early Q1 2026, likely in February. After that, the Bank is expected to pause to assess the impact of lower rates on inflation, before resuming gradual easing in the second half of 2026, bringing the policy rate toward 3.5%.
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