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Bank of Israel Cuts Rate to Lowest in More Than Two Years

The Bank of Israel reduced its benchmark interest rate to its lowest in more than two years as growth and inflation slowed.

Governor Stanley Fischer and the monetary policy panel cut the rate by a quarter-point to 1.75 percent, the Jerusalem-based bank said on its website today. Eight of the 23 economists surveyed by Bloomberg forecast the decision, while 14 predicted no change. One forecast a half-point reduction.

“The decline in the inflationary environment and the appreciation of the shekel,” are the main reasons for the decision, David Reznik, head of fixed-income research at the Leumi Capital Markets division of Tel Aviv-based Bank Leumi Le- Israel, said prior to the announcement. “Central banks around the world are reducing interest rates wherever they still can.”

The Bank of Israel has gradually reduced the borrowing rate from 3.25 percent in 2011 in an effort to shore up the economy amid the European debt crisis. The committee left the rate unchanged at the end of November, after an unexpected quarter- point cut the previous month.

Economic growth eased to an annualized 2.9 percent in the third quarter, the slowest in three years, from 3.4 percent the previous three months. Inflation declined to 1.4 percent in November, the lowest since July. The government’s price-rise target is 1 percent to 3 percent.

The shekel has strengthened by about 6 percent against the dollar since Nov. 15, and was trading at 3.7446 shekels at 4:22 p.m. in Tel Aviv.

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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