The Bank of Israel monetary committee on Monday cut the interest rate for July by 0.25 percent (25 base points) to 2.25 percent.
The Bank of Israel cited the low interest rate, continued moderate GDP growth at around 3% a year, and the global economic slowdown as the reasons for the interest rate cut. Most analysts had predicted the rate cutImmediately after the announcement a senior source at the Bank of Israel told "Globes," "The Israeli economy is in good shape in relation to other countries. Lowering the interest rate is a form of buying insurance against negative developments that might take place in the global economy."
The Bank of Israel also reiterated its growth forecast of 3.1% for 2012 and 3.4% for 2013 and predicts inflation of 2.4% over the next 12 months with the interest rate remaining at 2.25%.