\u201cIt\u2019s important for people to realize that we are not likely to embark on a path that goes back to those very low close to zero interest rates that we saw in the pre-COVID period,\u201d Brender said.<\/p>\n
\t Monday\u2019s decision was taken by the central bank\u2019s monetary committee, led by Bank of Israel Governor Amir Yaron. Ahead of the decision, the majority of economists were in consensus that the central bank would lower interest rates as consumer prices continued to moderate in recent months. Israel\u2019s annual inflation rate held steady in October at 2.5%, and remained within the government\u2019s 1%-3% annual target range for a second consecutive month.<\/p>\n Yaron has come under fierce scrutiny by politicians and manufacturers for hesitating to lower high borrowing costs as households and businesses struggle to make mortgage and loan repayments during the two-year war with Hamas in Gaza. Finance Minister Bezalel Smotrich threatened to lower taxes if the central bank did not start cutting interest rates to ease the pressure on borrowers.<\/p>\n \u201cWhen we look at the data, we don\u2019t see pressure from the financial front,\u201d said Brender. \u201cWe do not see people getting into difficulties in repayment of loans, both for housing and non-housing loans.\u201d<\/p>\n \u201cThere\u2019s an expansion of credit for the business sector, so in that respect, there is also no sense of urgency,\u201d he remarked.<\/p>\n A lower interest rate path will come as a relief to some existing and potential mortgage borrowers and households with loans in Israel tied to variable prime rates of the Bank of Israel.<\/p>\n \u201cThe interest rate cut is expected to reduce the prime rate and provide some relief for mortgage holders, especially borrowers with a significant prime component,\u201d said Ofer Aharonovich, partner and manager of the mortgage division at Eldar Mortgages. \u201cStill monthly savings will be limited, but we can expect some revival in mortgage activity and the return of some buyers who hesitated in the past year.\u201d<\/p>\n \u201cHowever, a fundamental change in the mortgage market will require a series of interest rate cuts, not just a one-off move,\u201d Aharonovich noted.<\/p>\n \t Ori Mor, co-founder of Mor-Langermann Investment Banking, said the interest rate cut is more of a \u201csymbolic\u201d step and reflects a shift in sentiment.<\/p>\n \u201cA single cut will not dramatically lower mortgage payments or significantly reduce loan costs,\u201d said Mor. \u201cBut if the cut becomes the first in a gradual series, households will begin to feel the difference: mortgage repayments on prime-linked loans will decline, interest burdens on consumer credit will ease, and access to financing may improve.\u201d<\/p>\n \u201cThese effects accumulate slowly, but translate into meaningful long-term savings,\u201d he added.<\/p>\n Similarly, Yaniv Pagot, vice president of trading at the Tel Aviv Stock Exchange, said that \u201ca one-time interest rate reduction is not significant news, as interest rates are still very high, and credit is expensive \u2014 and therefore the market expects continuity.\u201d<\/p>\n Looking ahead, fiscal uncertainty over government spending in the 2026 state budget and geopolitical risks are expected to dictate the central bank\u2019s timing and path for further interest rate cuts.<\/p>\n \t \u201cThe Bank of Israel is very conservative, and it can be assumed that in upcoming interest rate decisions, increasing weight will be given to the approval of the 2026 budget, political stability, and geopolitical stabilization,\u201d said Pagot.<\/p>\n While the US- and Israeli-led mechanism monitors the Gaza ceasefire that went into effect on October 10, ending two years of bitter war that erupted with the Hamas invasion of Israel on October 7, 2023, the next phase of the plan is yet to be agreed upon.<\/p>\n Israel has been escalating its strikes on Iran-backed Hezbollah in recent weeks, accusing the terror group of violating the year-old ceasefire and increasingly attempting to rebuild its capabilities. On Sunday, Israel said it had killed<\/a> Hezbollah\u2019s military chief of staff, Haytham Ali Tabatabai, in a targeted airstrike in the southern suburbs of Lebanon\u2019s capital, Beirut.<\/p>\n \u201cThere are several risks of renewed acceleration of inflation: geopolitical developments and their impact on economic activity, an increase in demand alongside supply constraints, and fiscal developments,\u201d the central bank cautioned.<\/p>\n
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\n\t\tBank of Israel\u2019s head of research department Dr. Adi Brender. (Courtesy of Bank of Israel spokesperson division)<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/F250728YA059-640x400.jpg\")
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\n\t\tConstruction in the southern Israeli city of Sderot, July 28, 2025. (Yossi Aloni\/FLASH90)<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/ori-e1764007501782-300x480.jpg\")
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\n\t\tOri Mor, co-founder of Mor-Langermann investment banking. (Courtesy)<\/p>\n
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