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October 8, 2008

Israel cuts rates by 50 basis points

by Richard Kilner

Story link: Israel cuts rates by 50 basis points

The Bank of Israel has cut interest rates by some 50 basis points, meaning that the rate will be 3.75% with effect from 12 October.

The cut has been made in response to the worsening turmoil in the global financial markets, and is designed to help stave off the negative impact on the Israeli economy.

As the world economy continues to slow, commodity prices are forecast by the central bank to fall, which in turn will have the effect of reducing inflationary pressures.

In addition, there is now a greater chance of a slowdown in Israel’s economy, and a reduced interest rate, it is hoped, will bolster demand and economic activity.

Lastly, the half point rate cut has been made to try and promote liquidity in the financial sector.

Israel’s rate cut comes on the same day as Australia slashed its rates by 100 basis points, with both nations reacting to the dramatic turmoil that has been present in the global financial world for most of September and continues into this month.

 

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