Monday, November 28, 2011

Bank of Israel Cuts Interest Rate 25bps to 2.75%

The Bank of Israel cut its benchmark interest by 25 basis points to 2.75% from 3.00%.  The Bank said: "The decision to reduce the interest rate to 2.75 percent for December is consistent with the interest rate policy that is intended to entrench the inflation rate within the price stability target of 1–3 percent inflation a year over the next twelve months, and to support growth while maintaining financial stability. The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel, the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel."

Previously the Bank cut its monetary policy interest rate in September, after leaving it unchanged at its June, July, and August meetings, and increasing the interest rate by 25 basis points to 3.25% at its May meeting this year.  Israel recorded annual inflation of 2.7% in October, 2.9% in September, 3.4% in August and July, 4.2% in June, 4.1% in May, and 4.0% in April and just inside 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 said: "The GDP growth forecast is 4.7 percent for 2011, and 3.2 percent for 2012."  The Israeli Shekel (ILS) has weakened about 7% against the US dollar this year, while the USDILS exchange rate last traded around 3.78


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