The Bank of Israel’s October 2026 decision to hold the policy rate at 3.25 percent after three prior cuts has anchored trader expectations for the February 2027 meeting, where no change leads at 40.5 percent. Annual inflation stood at 1.6 percent in September, with staff forecasts of 1.5 percent for 2026 and 2.1 percent for 2027 remaining inside the 1–3 percent target range. Strong headline growth projections contrast with more moderate domestic activity estimates, while persistent geopolitical tensions, shekel depreciation, and fiscal uncertainties—including defense spending risks—support the central bank’s data-dependent pause. Markets price limited scope for further easing or hikes by early 2027, consistent with the staff outlook of an average rate near 3.0 percent by Q3 2027.