Four of the five narrow monetary forum members said that an early rate cut would not affect the markets.
The Bank of Israel today published the minutes of the mid-November 50-basis point interest rate cut, a day after Governor of the Bank of Israel Prof. Stanley Fischer made another similar cut, this time on schedule, on the last Monday of the month. Fischer made the decision to cut the interest rate on November 11 over the objections of four of the five members of the narrow monetary forum.
Since the outbreak of the global financial crisis, the Bank of Israel has held a large number of monetary discussions each week. In the discussions that preceded the November 11 rate cut, four forum members said that there was no advantage in bringing forward the interest rate decision because it would have no material effect on the market. They added that a rate cut might actually make monetary policy management more difficult in the future.
The four members of management told Fischer that it was very important to wait for additional macroeconomic data, which would be published during the latter half of November. They objected only to the timing of the rate cut; they all agreed that a sharp cut in the interest was necessary. Following yesterday's decision, the interest rate is now 2.5%, the lowest in Israel's history.
Published by Globes [online], Israel business news - www.globes-online.com - on November 25, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008