As economy flails, Bank of Israel sets rate at record low .25%

August 25, 2014 16:42


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The Bank of Israel Monetary Committee on Monday cut the interest rate to its lowest-ever lever, unexpectedly halving it to .25 percent on the background of disappointing economic growth at home, low inflation and a still-limp recovery in Europe.

"The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel and in the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel," the committee wrote in its decision. The central reason given was low inflation, which came in at just .3% over the past 12 months, below the 1-3% target.

The ongoing conflict in Gaza, entering its eight week, has already taken its toll on the economy, but second quarter growth, before the operation began in July, was already stalled at 1.7%.

Though the overall impact of the war could not yet be measured, the committee note that, "an extended negative impact is expected in tourism, and a negative impact, apparently temporary, in private consumption."

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