Bank of Israel Decision in September?

The strongest argument for a September cut is the Bank of Israel’s recent policy trajectory. The Bank has already lowered rates repeatedly in 2026, including a July 6 cut to 3.5%, and its own official materials show the next decision date is September 1, 2026. That pattern indicates an active easing cycle rather than a prolonged hold, which makes another reduction plausible if incoming data remain supportive.

The macro backdrop also favors some further easing. Recent reporting and market commentary point to inflation around the bottom half of the target range, with the shekel relatively strong and inflation pressures described as moderating. Reuters and other sources said the July cut was justified by stable inflation and lower energy prices, while the Bank’s baseline forecast has been described as implying additional gradual easing over the following year. Those conditions make a September cut economically defensible if the data do not deteriorate before the meeting.

The main reason to keep the probability below 50% is that the Bank has not committed to a fixed sequence of cuts. Its guidance ties future moves to inflation, activity, geopolitical uncertainty, and fiscal conditions, and recent commentary notes caution about war-related risks and fiscal sustainability. After several cuts in a short span, the committee may prefer to wait for more evidence that inflation is contained and that the economy can absorb easier policy without reigniting price pressures or destabilizing expectations.

Market pricing also leans against a September cut, with Yes trading well below No. That suggests traders think a pause is more likely than another immediate reduction, even if the medium-term direction is still downward. In practical terms, the market appears to be pricing a gradual easing cycle with September as a live but not dominant cut decision, which is consistent with a below-even probability for Yes.