The Bank of Israel on Monday decided to lower interest rates, following the US deal with Iran, eased global geopolitical tensions, and a stable inflation environment, and said it sees the economy growing at a slightly faster pace this year.

The central bank reduced interest rates from 3.75 percent to 3.5%, the lowest level since November 2022. It marked the third rate cut this year, after borrowing costs for households and businesses came down in May and January.

“The Memorandum of Understanding (MOU) signed between the US and Iran led to a decline in energy prices and moderation in global geopolitical tension,” Bank of Israel Governor Amir Yaron said at a press conference in Jerusalem. “However, the level of uncertainty remains high…tension continues in the north, and its ramifications continue to be reflected in economic activity.”

Finance Minister Bezalel Smotrich, who in recent months repeatedly criticized the central bank’s conservative monetary policy, called for steeper interest rate cuts to ease the financial plight of households and businesses, and help weaken the strong shekel, which is harming exporters.

“The minimal interest rate reduction does not match the challenges facing households and businesses, is not aligned with the needs of the economy, and makes things harder for the high-tech sector and exporters,” Smotrich lamented. “A sharp reduction in the interest rate is the step needed that will ease the cost of living and balance the strengthening of the shekel.”

Over the past year, the shekel, which recently reached a 33-year high, has risen by as much as 20% against the dollar despite........

© The Times of Israel