Bank of Israel Lowers Interest Rates Amid Ceasefire's Impact

The Bank of Israel has reduced short-term interest rates by a quarter-point for the first time in nearly two years, following a ceasefire in Gaza. The move aligns with global trends in monetary easing. Inflation has steadied, staying within the official target range, easing financial pressures.

The Bank of Israel has taken a significant step by lowering its short-term interest rates by a quarter-point, marking the first reduction in nearly two years. This decision, announced on Monday, comes in the wake of a ceasefire in Gaza that has led to easing inflation and reduced geopolitical risks.

The benchmark rate was cut to 4.25% from the previous 4.5%, a move that was anticipated by both analysts and financial markets. The decision follows similar actions by other global central banks that have started to ease monetary policies. The recent U.S.-brokered ceasefire between Israel and the Palestinian militant group Hamas has been crucial to this change.

The Bank's monetary committee initially lowered the key rate by a quarter-point in January 2024 at the onset of the Gaza war but had maintained a conservative approach during the prolonged conflict. This cautious stance was primarily due to rising price pressures, largely driven by supply constraints. Now, with the inflation rate easing and stabilizing at 2.5% in October, within the official target range, the Bank has found room to adjust rates.

(With inputs from agencies.)