**Bank of Israel monetary policy decisions reflect a data-dependent approach balancing subdued inflation against labor market tightness, exchange-rate volatility, and fiscal risks.** After consecutive 25-basis-point cuts in May and July that brought the policy rate to 3.5 percent, July CPI inflation fell to a five-year low of 1.5 percent—comfortably inside the 1–3 percent target. This has created scope for further easing, yet analysts note limited urgency following two straight reductions amid a still-tight labor market and balanced inflation risks. Recent shekel movements, including a rebound in the dollar above the NIS 3 threshold, have moderated cut expectations that briefly priced in a roughly 50 percent chance of another reduction. Forecasters such as Citi now assign higher probability to a hold on the September 1 decision, while still projecting two additional cuts by early 2027. Geopolitical uncertainty and potential defense-budget increases that could widen the fiscal deficit and rekindle price pressures further support a cautious stance. Market pricing therefore assigns the large majority of probability to unchanged rates in September, consistent with the view that the Monetary Committee will pause to reassess incoming data before resuming gradual easing.