Will the Bank of Israel cut by 25 bps at the August 2026 meeting?

Analysis

The Bank of Israel has already shown its hand. After two cuts brought the policy rate to 3.5%, Governor Amir Yaron used his August 19 remarks to draw a clear line. Inflation printed at 1.5% in July, the lowest reading in five years and comfortably inside the 1-3% target band. Officials still expect it to drift back toward the middle of that range as housing and services costs firm. Growth removes any sense of urgency to ease further. Second-quarter GDP expanded at a 15.4% annualized clip. Unemployment sits near 2.9%, a tight labor market by any measure. Having already moved in July, the committee has plenty of room to pause and watch incoming data rather than rush a second consecutive cut. The decision date shifted from August 31 to September 1, but the substance is unchanged. A quarter-point cut would require a sharp reversal of guidance delivered only days earlier, and nothing in the recent data path supports that kind of about-face. Fiscal and geopolitical risks, explicitly flagged by Yaron, reinforce the case for caution rather than fresh stimulus. One thing to watch: a sudden soft print in services or housing inflation, or an abrupt geopolitical shock, before the statement lands.