Heads up.
If you move money between Shekels and Dollars (or Euros), you need to see this.
The Bank of Israel just made a move that changes the math for expats, investors, and anyone with a mortgage in Israel.
Here is what’s happening—and specifically why you should pay attention.
The News: Rates Are Going Down
It’s official.
The Bank of Israel (BOI) Monetary Committee just lowered the benchmark interest rate by 25 basis points.
That brings the new rate to 4.25%.
This is a big deal.
Why?
Because this is the first rate cut since January 2024. After holding steady for nearly two years to keep the economy stable during the war, the central bank is finally shifting gears.
Why Did They Do It? (The 2 Factors)
You might be wondering:
“Why cut rates now?”
According to the BOI, it comes down to two simple factors:
1. Inflation is Chill Recent readings clocked inflation at 2.5%. That is comfortably inside the government’s target range (1%–3%).
2. The Economy is Bouncing Back This is the surprising part. Economic activity rebounded sharply in the third quarter. In fact, GDP expanded at an annualized rate of 12.4%.
With inflation down and growth up, the BOI felt safe to lower the cost of borrowing money.
The Twist: The Shekel is Getting Stronger
Here is where things get interesting.
Economics 101 says that when a country cuts interest rates, its currency usually gets weaker. (Because investors move their money elsewhere to get higher returns).
But look at what the Shekel did:
- +1.3% against the U.S. Dollar
- +2.9% against the Euro
Why is the Shekel rising? The market is reacting to the strength of the Israeli economy (that 12.4% GDP growth) rather than just the interest rate. Investors see stability returning, and that is boosting the currency.
What This Means For You
Here is the bottom line for your wallet.
If you earn in USD and spend in ILS: This is tough news. A stronger Shekel means your Dollars buy fewer Shekels than they did last month. The rate cut didn’t weaken the Shekel as you might have hoped.
If you have an Israeli Mortgage: This is good news. If you have a Prime-linked mortgage, your monthly payments just went down slightly. The “Prime” rate will drop from 6.0% to 5.75%.
If you are planning a large money transfer: Timing is everything. With the Shekel strengthening, waiting “for the rate to get better” might be risky. The trend right now points to a robust Shekel.
What’s Next?
The Bank of Israel says future cuts depend on “geopolitical stability.”
If things stay quiet, economists expect another cut could happen soon.
Next Decision Date: Monday, January 5, 2026.
