In an unusual move, the Bank of Israel has cut the interest rate by 50 basis points to 3.75%. The cut was in between the monthly interest rate decisions.
The central bank announced that the decision was in response to sharp rise in uncertainty in global financial markets, and fears that it may reach Israel's markets.
The bank warned, "The chances of a slowdown in Israel's rate of economic growth in the near future have risen. The current reduction in the interest rate will act to strengthen the economy's ability to meet the challenges confronting it."
The Bank of Israel also listed several other considerations that led to its decisions, including expected lower inflation as a result of falling commodity prices due to a global economic slowdown.
Another reason given for the rate cut was volatility domestic financial markets.
Published by Globes [online], Israel business news - www.globes-online.com - on October 7, 2008
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