A sudden reduction of interest in Israel to contain the fallout from the Gaza war

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Jerusalem, ( Palestine Telegraph)  – Via Reuters-Israel reduced interest rates abruptly on Monday for the first time in five months, taking advantage of the falling inflation to try to contain the economic fallout of the war in Gaza and the strength of the local currency shekel.

The Central Bank cut the main lending rate a quarter point to 0.5 percent to match the lowest level at all times,  where also it reached to the peak in the global financial crisis in 2009.

Reuters polled the opinions of 10 economists on price stability who all agreed that nothing has changed since the decision of the bank to cut the interest rate during its’ meeting in February.

The Central Bank said in a statement that despite the economic data that pointed to continued moderate growth, thanks to exports of services, the war against Hamas would undermine growth somehow. The growth of exports and private spending is weak, while job growth has stopped.

The shekel goes to the lowest price in three weeks after the announcement of the decision, to score 3.43 shekels to the dollar, but remains up 10 percent since the beginning of 2013.

The Central Bank forecast before the outbreak of fighting in Gaza expected growth in economy 2.9 percent in 2014 after a record 3.3 percent in 2013.

But some economists downplayed the impact of the conflict in Gaza, attributed the rate cut to declining inflation and ILS.

The annual inflation rate dropped to the lowest level in seven years registered 0.5 percent in June to come down from the Government’s target range between one and three percent. Excluding housing costs, no more than the inflation rate of 0.2 percent last month.

(By Ahmed elhamy Arabic Bulletin, edit :Mustafa Saleh, transcribed to English: Suzan Khalaf)

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