Israel Viewpoint: BoI: Cut again, pause next

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Israel Viewpoint: BoI: Cut again, pause next

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Israel Viewpoint

BoI: Cut again, pause next

July cut, then hold until 4Q 03 July 2026

The BoI faces a more complicated policy backdrop than at the May meeting: its revealed GEM Economics

sensitivity to earlier shekel strength and lower inflation expectations opened the door EEMEA | Israel

for deeper easing expectations, but part of that currency move has now been reversed Hande Kucuk

by a combination of BoI communication, geopolitics and a more hawkish Fed. We still Turkey & Israel Economist

expect a 25bp cut to 3.50% in July, supported by lower oil prices, benign near-term MLI+44 (UK)20 7996 3948

inflation and the lagged disinflationary impact of earlier shekel appreciation. However, hande.kucuk@bofa.com

we expect the BoI to signal a more gradual approach to further easing than markets Mikhail Liluashvili

currently price. The June shekel reversal, higher core rates, EM FX weakness and ongoing EEMEAMLI (UK)Local Markets Strategist

geopolitical uncertainty argue for a cautious and data-dependent message. We expect +44 20 7996 1142

mikhail.liluashvili@bofa.com

forecast revisions to signal caution versus market pricing, preserving optionality after

EEMEA FI Strategy & Economics

July. Our baseline is a pause at 3.50% until 4Q, followed by one further 25bp cut in MLI (UK)

November to a 3.25% terminal rate. GEMs FI Strategy & Economics

BofAS

Gradual recovery underway, FX still key

The macro backdrop remains supportive of a cautious easing cycle. Activity is recovering

For a list of open tradeafter the 1Q contraction, with high-frequency indicators pointing to resilient private

recommendations and tradeconsumption, strong high-tech services exports and a still-tight labour market. Fiscal