The Bank of Israel continued intervening in the foreign exchange market during June, purchasing approximately $1 billion, according to the central bank’s monthly report on its foreign exchange reserves. This marks the second consecutive month in which the central bank has purchased dollars, following its acquisition of about $801 million in May (which was its first intervention in the foreign exchange market since 2022).
Despite the purchases, the Bank of Israel’s foreign exchange reserves remained virtually unchanged, standing at $238.7 billion at the end of June, an increase of just $18 million compared to May. Foreign exchange reserves amounted to 37.2% of gross domestic product. Alongside the dollar purchases, the reserves were also affected by government activity in the foreign exchange market totaling $625 million, as well as valuation adjustments that reduced reserves by approximately $1.46 billion.
The Bank of Israel said the purchases “were carried out on a targeted basis and for the purpose of maintaining the orderly functioning of the markets.” The central bank reiterated that it is not intervening to maintain any particular exchange rate. For now, the Bank of Israel has declined to disclose the exact timing of its intervention, but continues to emphasize that it was prompted by unusual and disorderly market activity it identified, rather than by any intention to influence the exchange rate.
Yesterday, the Bank of Israel’s Monetary Committee decided to cut the benchmark interest rate by 0.25 percentage points to 3.5%. This is the second consecutive rate cut by the central bank. Since the beginning of the year, the Bank of Israel has reduced interest rates three times out of five policy decisions, lowering the rate from 4.25% to 3.5%. The latest cut was widely expected and matched the forecasts of all analysts.
At the same time, the bank raised its 2026 economic growth forecast to 4.0%, up from 3.8% in its previous forecast issued in March, bringing it in line with the Finance Ministry’s projection. It also lowered its forecast for this year’s budget deficit to 4.9%, down from 5.3%; reduced its 2026 inflation forecast by 0.4% to 1.8%; and updated its interest rate forecast for July 2027 to 3.0%, indicating that as many as two additional rate cuts could take place over the coming year.
