November 2025 Market Insights: First Rate Cut and Stabilizing Conditions

Market Updates

November was characterized by strong gains in the local equity market, driven by the ongoing ceasefire in Gaza and the first interest-rate cut by the Bank of Israel in two years, which lowered the policy rate from 4.5% to 4.25%. At the same time, geopolitical risks resurfaced somewhat, with rising tensions in the north after the assassination of Hezbollah’s deputy leader, as well as renewed friction in the Syrian arena following an incident in which IDF reserve soldiers were injured in Beit Jann. Reports also pointed to increased U.S. pressure to begin discussions on the next phase of the Trump administration’s 22-point plan, even though the first phase has yet to be completed.

Market Performance in November

In Israel, major stock indices surged to new highs:

• Israeli Equities:

  • TA-35: +4.7% (record high)

  • TA-125: +4.3%

  • TA-90: +3.3%

Bond markets posted modest advances during the month.

• Israeli Bonds:

  • Tel-Bond 60: +0.2%

  • Tel-Bond Shekel: +0.2%

Macro Picture

The Consumer Price Index (CPI) rose by 0.5% in November, in line with market expectations. Annual inflation remained stable at 2.4%, comfortably within the Bank of Israel’s 1%–3% target range. The past several months of moderate inflation readings reinforce the view that inflation has consolidated within the target band, increasing policy flexibility and supporting a gradual easing cycle.

For the first time since early 2024, the Bank of Israel cut its policy rate by 0.25% to 4.25%, in line with market expectations. The decision was supported by inflation stabilizing, a strengthening shekel, narrowing government bond spreads, and a continued decline in Israel’s risk premium. Improved economic activity in the third quarter and resilience in the labor market further underpinned the decision. The rate cut is expected to ease financial conditions through lower borrowing costs and to support the post-war economic recovery.

On the sovereign credit front, S&P Global Ratings reaffirmed Israel’s A rating and upgraded the outlook from negative to stable, citing the ceasefire agreement and the demonstrated resilience of Israel’s economy and financial system. This followed earlier signs of stabilization across sovereign risk indicators, including tighter credit spreads and improving investor sentiment.

Looking ahead, inflation expectations for the next 12 months are projected to decline toward — and potentially below — 2%. While a rate cut at the January meeting appears less likely, the current trajectory supports the possibility of additional monetary easing later in Q1 2026, contingent on continued inflation moderation and macro stability.

In currency markets, the U.S. dollar strengthened modestly against the shekel, rising by approximately 0.10% to around 3.26 ILS/USD. This followed a period earlier in November when the shekel briefly traded below 3.20, its strongest level in more than three years. The dollar’s rebound was partly driven by U.S. equity market weakness, prompting institutional FX rebalancing and increased demand for dollars.

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