The Bank of Israel left its benchmark interest rate unchanged at 3.25% on Wednesday, opting for a pause a week before the country's general election on October 27 and amid sustained geopolitical tensions, Reuters reported.

Source: Reuters

The decision came after three successive rate cuts in May, July and September. The central bank had earlier cut rates last November and in January, before pausing due to the conflict with Iran and fears of a spike in supply-driven inflation, and then resuming its cuts.

Annual inflation edged up to 1.6% in September, from 1.5% in August — well within the bank's 1% to 3% target range. All 15 economists polled by Reuters had expected no move on Wednesday, with some citing the election and how it could affect Israeli policy toward Iran.

"Uncertainty remains high in view of the geopolitical tensions," the Bank of Israel said in its statement. It added that during the period reviewed, Israel's risk premium remained at levels similar to those prior to October 7, 2023, while the shekel depreciated.

The bank's research department raised its staff forecast, expecting GDP to grow by 5.6% in 2026 and 7.5% in 2027. It said much of those upward revisions reflects the large expected contribution of production abroad by Israeli firms; excluding that production, growth was forecast at 3.4% in 2026 and 5.1% in 2027.