Israel Urged to Secure 2025 Budget for Market Confidence

Israel's Bank of Israel pressed lawmakers to finalize the 2025 state budget unchanged. The central bank warned against military overspending, which led to a near 7% budget deficit in 2024. With inflation concerns, policymakers resisted lowering interest rates despite easing inflation in December.

The Bank of Israel has urged lawmakers to approve the 2025 state budget without further amendments to maintain financial market confidence, according to Bank minutes from a policy meeting on January 6.

Despite a slight reduction in inflation to 3.2% in December, interest rates were kept steady due to increased military expenditures and loose fiscal policies. These factors pushed the budget deficit close to 7% of GDP in 2024.

The central bank emphasized the necessity of maintaining the current budget framework to avoid further deficits and achieve a lower debt-to-GDP ratio by 2026.

(With inputs from agencies.)