Quick answer
The Bank of Israel targets annual inflation of 1% to 3% and sets one interest rate at eight scheduled decisions a year. It raised that rate from 0.10% to 4.75% between April 2022 and May 2023, held close to the peak for more than two years, and has cut five times since November 2025. The rate has been 3.25% since 31 August 2026, with inflation at 1.5%.
Who this guide is for
Use this guide for USD/ILS research, for comparing Israel with other small open economies, or for understanding a central bank where the exchange rate and geopolitical risk shape the rate path as much as domestic inflation.
BoI policy snapshot
The settings below come from the Bank of Israel and official statistics as stored on the Israel data page. Each figure carries its own date, because a rate, an inflation print and an exchange rate taken from different points in the cycle give a misleading picture.
| Measure | Latest | As of |
|---|---|---|
| Interest rate | 3.25% | Since 31 August 2026 |
| Consumer price inflation | 1.5% | August 2026, annual |
| Real policy rate | 1.75 pp | Policy rate less inflation |
| 10-year government yield | 4.06% | 30 September 2026 |
| USD/ILS | 3.0653 | 2 October 2026 |
Mandate and instruments
The Bank of Israel Law sets price stability as the central objective. Beyond that, the Bank supports the government's other economic goals, particularly growth, employment and reducing social gaps, and the stability of the financial system. The government defines price stability as inflation between 1% and 3% a year.
The interest rate is set by the Monetary Committee, chaired by the Governor, at eight scheduled decisions a year. Each decision is published with a statement and followed by minutes, and the Research Department's quarterly forecast gives the Bank's expected path for inflation, growth and the rate itself.
The Bank also has an active history in the foreign exchange market. It accumulated large reserves through purchases during years of shekel appreciation, and it has used those reserves to stabilise the market during periods of acute stress.
A fast hiking cycle and a long plateau
The rate stood at 0.10% from April 2020. The Committee began raising it on 11 April 2022 and reached 4.75% on 22 May 2023, ten increases in thirteen months. Inflation peaked at 5.4% in January 2023.
A single cut to 4.50% followed on 1 January 2024, and then the Committee held for almost two years. The plateau reflected inflation that stayed above the top of the target range for most of that period, a risk premium on Israeli assets and fiscal pressures, rather than the growth outlook alone.
Easing resumed on 24 November 2025 and has continued through 2026, with the rate at 3.25% from 31 August. Inflation has fallen to 1.5%, in the lower half of the target range, which leaves the real policy rate at about 1.75 percentage points.
Interest rate and inflation
The Bank of Israel interest rate (percent) against annual consumer price inflation (percent), 2020 to 2026.
Takeaway: Ten increases in thirteen months were followed by a plateau of almost two years; sustained cuts came only once inflation moved back inside the target range.
The real policy rate
Subtracting inflation from the policy rate gives a simple measure of how restrictive policy is. It is backward-looking, because it uses realised rather than expected inflation, but it is transparent and comparable across countries.
Real policy rate
Interest rate in force at month end less annual consumer price inflation, percentage points.
Takeaway: The real rate was -3.95 percentage points in July 2022, turned positive in May 2023 and was 1.75 in August 2026, close to its high for the period.
How Bank of Israel policy reaches the shekel
The shekel floats, and it is sensitive to three things beyond the rate differential: geopolitical risk, global equity markets and capital flows into the technology sector. Israeli institutional investors hold large foreign equity portfolios and hedge part of the currency exposure, so a rally in US stocks mechanically produces shekel buying.
A stronger shekel lowers import prices and does some of the central bank's work for it. USD/ILS fell from about 3.72 at the start of October 2024 to about 3.07 two years later. An appreciation of that size is disinflationary, and it is one reason the Committee has been able to cut while inflation fell toward the bottom half of its range.
The USD/ILS dashboard puts the exchange rate beside the rate differential and the release calendar for both economies.
A decision-day workflow
- Note the decision and the vote, and read the statement for the balance between inflation and activity.
- Compare the latest CPI with the 1% to 3% range and with the Bank's own forecast.
- Check the move in USD/ILS since the previous decision; appreciation substitutes for cuts.
- Watch the 10-year government yield for changes in the risk premium.
- Read the quarterly Research Department forecast for the expected rate path.
The policy rate history, with the timestamp of each announcement, is available from the API for backtests and dashboards:
curl -H "X-API-Key: YOUR_API_KEY" \
"https://api.fxmacrodata.com/v1/announcements/ils/policy_rate?start_date=2019-01-01"Official sources and related research
- Bank of Israel: policy decisions and statements.
- Israel Central Bureau of Statistics: consumer price statistics.
- Israel macro data: every tracked indicator and the release calendar.
- Policy rates by country and risk-free rates by country: the same measures across every covered market.
- Policy rate cycles across currencies: how tightening and easing phases compare.
