**Bank of Israel policy rates stand at 3.5% following consecutive 25-basis-point reductions in May and July 2026.** Inflation has stabilized near the 1–3% target midpoint at 1.5% year-over-year, supported by lower energy prices after the U.S.–Iran ceasefire and a stronger shekel. The Monetary Committee’s July statement and staff forecasts emphasized a gradual easing path toward 3% over the coming year, conditional on contained price pressures, steady labor-market conditions, and moderate GDP growth around 3.5–4%. Trader consensus for no change at the early-September decision reflects this data-dependent approach after recent stimulus, while the modest probability of a further cut captures Governor Yaron’s forward guidance and subdued inflation readings. Geopolitical risks and fiscal developments remain key variables that could shift the near-term path.