Gasoline price to drop 3.3% on January 1st, supporting continued monetary easing

ISRAEL - In Brief 30 Dec 2025 by Sani Ziv

---

Starting January 1st, the price of gasoline in Israel will be reduced to NIS 6.85 per liter. The decline reflects a 10.76% drop in global oil prices and a 2.26% appreciation in the shekel-dollar exchange rate. The 3.66% decline in fuel prices points to a particularly low CPI reading in January, in our view in the range of around -0.2% to -0.3%. This inflation environment supports a continuation of the monetary easing cycle. While most market participants currently do not expect a rate cut at the January meeting (next week), we believe that the economic conditions for another cut are already in place. Headline inflation is expected to fall to 1.7%-1.8% in January 2026, while inflation expectations from all sources have declined to around 2% or lower, with market-based expectations at approximately 1.6%. In addition, the shekel’s recent appreciation and the decline in global oil prices are exerting further downward pressure on prices. Accordingly, a rate cut at the upcoming January 5 meeting remains possible, although a cut at the February 23 meeting seems more likely. Factors that the central bank can invoke to leave the rate unchanged include a still-tight labor market, with unemployment at around 3%, the delay in approving the state budget and geopolitical uncertainty. As we have noted several times in the past, the ex-ante real interest rate is currently close to 2.5% (4.25% minus 1.8%), a relatively high level given the current inflation environment and pace of economic growth.