Yaron hints at faster rate cuts if shekel keeps strengthening

Governor of the Bank of Israel Amir Yaron told the Eli Hurvitz Conference that the shekel’s appreciation could depress inflation, justifying interest rate cuts.

Governor of the Bank of Israel Amir Yaron has signaled that interest rates might be cut faster if the shekel continues to strengthen. “Monetary policy is clearly affected by events and by the geopolitical situation, which is very volatile, and there’s no need to remind you of what happened just yesterday,” Yaron said at the Eli Hurvitz Conference on Economy and Society (formerly the Caesarea Conference).

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“The latest interest rate decision (in which the Bank of Israel cut its rate by 0.25%, A.Z.) embodied a balance between the geopolitical risks: war versus an agreement, a rise in energy prices versus a decline, currency appreciation versus depreciation. So everything is taken into account. Since the decision, the expectations of an agreement have risen, which has led to a sharp fall in energy prices, and at the same time to a further fall in Israel’s risk premium and additional appreciation of the shekel. All these things have further reduced inflation expectations,” Yaron said.

“Despite the fact that the retail market in Israel is not sufficiently competitive, such appreciation of the currency could certainly lead to a fall in inflation, and that is already reflected in inflation expectations,” Yaron continued. “Here I wish to emphasize: if inflation falls, and certainly if it approaches the lower limit of the target range, that will justify more expansionary monetary policy at a higher pace.”

Published by Globes, Israel business news – en.globes.co.il – on June 2, 2026.