the bank of israel.
(photo credit: Ariel Jerozolimski)
The Bank of Israel monetary committee cut the interest rate for December by 25
basis points to 2.75%, after leaving it unchanged for November and cutting it by
25 basis points for October. The Bank of Israel said that the interest rate cut,
together with the recent weakening of the effective exchange rate of the shekel,
should help Israel’s economy deal with the difficulties confronting
The interest rate cut was expected by a majority of analysts, most of
whom also expect further cuts in the interest rate to 2.0-2.25% in the first
half of 2012.
Among the reasons for the interest rate cut, the Bank of
Israel said that the debt crisis in Europe is becoming more severe and is
spreading to other countries. The bank said that there is growing concern over
the crisis’s potentially strong impact on the global economy, and that it is
already affecting the Israeli economy, an effect that is likely to
The Bank of Israel also cited the continuing slowdown in
Israel’s economic activity, due to falling export demand and slackening domestic
demand. Inflation expectations are close to the midpoint of the 1-3% target
range, and are likely to remain there over the coming year.
the Bank of Israel said, the European Central Bank (ECB) cut its interest, and
the US Federal Reserve said that it will keep its near-zero interest rate
through at least mid-2013.
Both the Fed and ECB are continuing with their
quantitative easing measures to deal with economic problems.
The Bank of
Israel also noted that the rise in home price slowed to 10.5% in the 12 months
through September from 12.1% in the 12 months through August, and that home
prices fell in August-September for the first time since December 2008. It
expects home prices to continue to moderate through the coming year.