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Bank of Israel Surprises Again, Shekel Weakens

May 27, 2013 at 17:42 by Vladimir Vyun

A sheet of 100-shekel banknotesThe Bank of Israel surprised Forex market participants for the second time this month, cutting interest rates yet again on today’s meeting. The Israeli new shekel weakened after the decision.

The BoI cut its main interest rate by 0.25 percentage point to 1.25 percent today, following the unexpected rate cut on May 13. The bank commented on the decision:

The decision to reduce the interest rate for June 2013 by 0.25 percentage points, to 1.25 percent, is consistent with the Bank of Israel’s interest rate policy, which is intended to entrench the inflation rate within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.

The central bank noted that “the global economy continued to present a mixed macroeconomic picture in the past two months”. The BoI said about the domestic fundamentals:

Updated indicators of economic activity which have become available so far indicate continued moderate growth in the first quarter, and a mixed trend in April.

As for the exchanged rate, the bank mentioned that the shekel was rising before the unscheduled mid-month meeting, but declined together with other currencies against the dollar since then.

USD/ILS was up from 3.7040 to 3.7139, rebounding from the daily low of 3.6808, and EUR/ILS went up from 4.7951 to 4.8004 as of 17:42 GMT today after falling to 4.7635.

If you have any questions, comments or opinions regarding the Israeli New Shekel, feel free to post them using the commentary form below.

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