Bank of Israel Drops Interest to Record Low

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JERUSALEM, Israel - Bank of Israel Governor Stanley Fischer announced a further cut in the national interest rate, the lowest in Israel's history.
Beginning Friday, November 14, the central bank's lending rate will drop to an all-time low of 3.0 percent, which should prompt retail banks to lower interest on overdrafts.
Fischer's latest cut reflects the need to respond to the continuing economic downturn worldwide, which some analysts believe is occurring more rapidly than anticipated.
"The Bank of Israel is signaling that it, the government and the Finance Ministry understand there is a need for government intervention, and we're going to see more rescue plans from the government," said Clal Finance analyst Ori Greenfeld Tuesday evening.
While the 3 percent rate is the nation's lowest ever, Greenfeld said it may be cut even further in 2009, to as low as 2.5 percent.
"The Bank of Israel's interest rate decisions follow developments in world markets," Greenfeld said. "If interest rates around the world continue to drop, the same will happen here," he said.
Greenfeld said concern about inflation is not the main focus right now.
"At this point, what's needed are capital injections to the banks, so they'll lend money, and breathing room for corporate bonds," he said.

Tuesday's announcement marks the second time the Bank of Israel governor has lowered Israeli interest rates outside the normal timeframe, usually on the last Monday of the month.
Meanwhile, the dollar moved up .5 percent to a 3.796 exchange rate against the shekel, while Israeli stocks fell Tuesday, with technology and real-estate stocks taking the hardest hits.
The latest reduction in interest rates brings the total drop in less than a month to 1.25 percent.
Sources: Haaretz, YNet news

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