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Bank of Israel Cuts Main Interest Rate to Record Low

August 25, 2014 at 19:35 by Vladimir Vyun

A coin on some ILS billsThe Bank of Israel surprised the Forex market today, cutting its benchmark interest rate unexpectedly, following the same move in the previous month. This led to a huge slump of the Israeli shekel.

The BoI cut its main interest rate by 25 basis points to the record low of 0.25 percent today, making a huge surprise to analysts, who have expected the central bank. The central bank made the same interest rate cut in July.

The bank explained its decision by weakening inflation and waning economic growth. It is not surprising considering that Israel fights with Palestinian militant groups in Gaza for seventh week. Truth be told, the country experienced economic troubles even before the war, meaning that the economy is even more vulnerable than usual to negative consequences of the conflict.

USD/ILS jumped from 3.5322 to 3.5698, and EUR/ILS climbed from 4.6599 to 4.7101 as of 19:35 GMT today.

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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