Bank of Israel Cuts Interest Rate to 0.10% from 0.25%

February 23, 2015

The Bank of Israel has become the latest central bank to cut what already seemed to be a rock-bottom interest rate level.  In each of the last four calendar years, monetary officials had implemented three rate cuts, each by 25 basis points and cumulating to a reduction of 300 basis points from 3.25% to 0.25%.  Today’s 15-basis point cut was the first one in six months and surprised most analysts.  Israel has deepening negative inflation because of the sharp decline of oil prices.  Consumer prices fell 0.5% between January 2014 and January 2015, and even non-energy CPI inflation was merely 0.2%.  A statement posted on the Bank of Israel’s web site notes that the Shekel appreciated sharply since the last monthly policy meeting even against the dollar and that expected inflation has crept lower.  Israel’s low inflation rate was put in the context of many other economies that are either in deflation like Israel and in danger of becoming so.  Sub-3% inflation in 2014 was at a 5-year low.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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