Monday, September 26, 2011

Bank of Israel Cuts Rate 25bps to 3.00%

The Bank of Israel cut its benchmark interest rate by 25 basis points to 3.00% from 3.25%.  The Bank said: "The decision to reduce the interest rate for October to 3 percent is based mainly on the negative turnaround in the global economy, is consistent with the return of inflation to within the target range of price stability, and is intended to support growth while preserving financial stability."  Also noting: "The more severe global slowdown is reflected in a slowdown in the growth of real activity in Israel, and in particular in the weakness of goods exports."

Previously the Bank held its monetary policy interest rate unchanged at its June, July, and August meetings, after increasing the interest rate by 25 basis points to 3.25% at its May meeting this year.  Israel recorded annual inflation of 3.4% in August and July, compared to 4.2% in June, 4.1% in May, and 4.0% in April and just above the Bank's inflation target range of 1-3%.

Israel reported GDP growth of 4.8% (annualised) in the March quarter, and 3.3% in the June quarter. "The Bank of Israel has lowered its growth forecast for 2012 from 3.9% to 3.2%, and... the balance of risks is to the downside."  The Israeli Shekel (ILS) has weakened about 4% against the US dollar this year, while the USDILS exchange rate last traded around 3.72


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