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  • In the course of 2023, the Bank of Israel raised its interest rate to 4.75 percent as the banking system amassed historically large liquidity surpluses.
  • Against the background of the interest-rate increase, deposit performance rose in all activity segments, particularly the household sector. Furthermore, out of total deposits of private customers, the share of private customers’ interest-bearing deposits[1] surpassed the share of such funds held in current accounts, reaching nearly 60 percent in February 2024.
  • In 2023, the average pass-through rate in the household sector was 68 percent.[2] The business activity sectors exhibited higher pass-through and deposit-interest rates (83 percent and 93 percent on average for the small- and large-business sectors, respectively).
  • In 2023, on average, about one-third of household deposit performance was for a term of up to one month to maturity. From the last quarter of 2023 onward, such deposits accounted for nearly half of performance; the pass-through rate for deposits to longer maturities was 20 percentage points higher and verged on that of the business sector. In the course of the year, however, the pass-through rate on deposits for terms longer than one year declined to below that on medium-term deposits (between one month and one year), in accordance with the development of interest rate expectations.
  • The banking system offers its customers deposits at variable rates and fixed rates in view of the market’s expectations of the interest rate environment. Since the end of 2023, the distribution of deposit performance between variable and fixed interest rates stabilized at similar levels, as did the pass-through rate on each of these tracks. This trend reflects the increase in uncertainty about the interest rate environment, possibly in view of the war.
  • Although the cumulative pass-through rate of the Bank of Israel interest rate to the household deposit interest rate declined, it remains higher than the corresponding rates in the United States and Europe and fell slightly short of those in the UK and Australia.


[1] “Private customers” are the household and private-banking segment.

[2] The pass-through rate is, in effect, the rate at which the banks pass on the change in the Bank of Israel rate to the deposit interest rate. The pass-through rate reflects the elasticity of retail and wholesale deposit interest to the Bank of Israel rate. In this box, we calculated the pass-through rate as the cumulative change in the deposit rate in a given month as against the deposit rate in March 2022 (the month preceding the onset of rate increases), divided by the cumulative change in the Bank of Israel rate during that time.