JERUSALEM, May 25 (Xinhua) -- Israel's central bank on Monday cut its benchmark interest rate by 25 basis points to 3.75 percent, the third cut since November 2025.

The rate had been held steady at 4.5 percent for nearly two years, following a sharp rise from just 0.1 percent in April 2022 to a peak of 4.75 percent, before a slight reduction to 4.5 percent in January 2024.

The latest cut was made against the backdrop of low inflation, which remained within the government's 1 to 3 percent target range, the central bank explained.

It added that the shekel has strengthened significantly, appreciating by 8. percent against the U.S. dollar and 7.2 percent against the euro since the previous base interest decision in late March.

The bank noted that current indicators of economic activity point to recovery following the war with Iran, but geopolitical uncertainty remains significant, both domestically and globally.

The rate cut drew sharp criticism from the Manufacturers Association of Israel, which called the 0.25 percentage point reduction "detached from reality" and harmful to exporters, industry, and the hi-tech sector.

It argued that a strong shekel and high interest rates are damaging Israeli exports, even as inflation stays within the government's target range.