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Fischer Says Israel Has Room to Cut Interest Rate If Necessary

Bank of Israel Governor Stanley Fischer said there is room to lower the benchmark interest rate if needed, and expressed concern over the government’s budgetary challenges.

The central bank kept its rate unchanged at 2 percent last month after unexpectedly cutting it by a quarter-point in October. There are signs that economic growth will continue, the bank said when it held the rate.

“The economy is doing well in most respects and we’re predicting growth for next year of 3 percent,” Fischer said today at a Tel Aviv conference. “Clearly there’s room if necessary to cut interest rates.”

Fischer said the bank will have keep a close eye on housing prices and could use macro-prudential measures to lessen the impact of rate cuts on the real estate market.

The government will have to cut about 15 billion shekels ($3.9 billion) of planned spending and may have to raise taxes in order to lower the deficit, the governor said, adding “that’s a huge budgetary problem.”

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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