Monday, January 23, 2012

Bank of Israel Cuts Interest Rate 25bps to 2.50%

The Bank of Israel cut its benchmark interest by 25 basis points to 2.50% from 2.75% previously.  The Bank said "The decision to cut the interest rate to 2.5 percent for February is consistent with the interest rate policy aimed at keeping inflation within the price stability target range and is intended to support real economic activity, against the background of the slowdown in global demand."

Previously the Bank paused, after cutting its monetary policy interest rate 25 basis points in November and September, 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 2.6% in November, 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%.

The Bank expects the Israeli economy to grow about 2.8 percent this year.  The Israeli Shekel (ILS) has weakened about 5% against the US dollar over the past year, while the USDILS exchange rate last traded around 3.77.  The Bank next meets on the 27th of February 2012.


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