BOI mulls cutting interest rate over market plunge

The graphs don’t yet tell us whether this is a one-off drop, a kind of correction, or if the falls will continue.

August 10, 2011 06:50
1 minute read.
Traders look at screens at a bank in Lisbon, Weds.

traders watching stocks. (photo credit: Rafael Marchante/Reuters)

Top Bank of Israel officials are holding regular meetings to discuss the market conditions and possible responses to them, and may decide to cut the interest rate for September in response to plunges on the Tel Aviv Stock Exchange and global markets.

“We’re constantly monitoring global developments,” a top Bank of Israel source said. “We’re examining how close they will come to us. We met Sunday and yesterday. The monetary council is meeting tomorrow. We have to see how things will develop.

The graphs don’t yet tell us whether this is a one-off drop, a kind of correction, or if the falls will continue.

Fortunately for us, the governor has a lot of experience.”

The minutes of the interest rate decision for August, published Monday, revealed that the central bank discussed a possible downgrade of the US credit rating. It was also worried about the deteriorating economic conditions in the US and Europe.

With the rest of the world, the central is now waiting to see what measures the US Federal Reserve will carry out, including a possible third qualitative easement to stabilize the economy and markets.

The Bank of Israel will announce the interest rate for September at the end of August. Conditions for an interest rate cut are now higher than before, with lower inflation expectations, slowing economic growth, and worries about a new global economic crisis.

“We’re worried about the debt crisis, and we said so in the protocols,” said the central bank source. As for the possibility that the bank will take drastic action of the kind it took in response to the October 2008 crisis, when it made an extraordinary midmonth interest rate cut, the source said, “If we have to act, we’ll act – and we know how to act very fast. But that’s not on the agenda at the moment.”

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