In a surprise move, Governor of the Bank of Israel Prof. Stanley Fischer has announced that he has cut the interest rate by 0.5%, to a rate of 3%.
The interest rate cut will go into effect on Friday, November 14.
The interest rate is now at the lowest level in the history of the State of Israel.
The Bank of Israel said that the decision was based on new information that has become available since its previous rate cut on October 27. The central bank said that recent data shows that an upcoming global slowdown will be more severe than first thought, and it worried that "the increased severity of the global slowdown is expected to influence real activity in Israel."
The Bank of Israel said that the cut in the interest rate would help the economy deal with the global economic crisis. The central bank said that the cut "serves to strengthen the ability of Israel's economy to deal successfully with the effects of the expected global slowdown, by lowering the cost of credit to households and the business sector."
The news sent the shekel-dollar exchange rate to a jump of nearly 2% to NIS 3.8715/$, compared with the representative rate set earlier today.
Published by Globes [online], Israel business news - www.globes-online.com - on November 11, 2008
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