Bank of Israel cuts interest rate to lowest level in history

24 March 2008

By The Associated Press

Stanley Fischer, governor of the Bank of Israel, cut the rate by half a percent to 3.25 percent on Monday. The goal is to stop the drop in the value of the American dollar against the Israeli shekel.

Israeli manufacturers complain that the high shekel value is harming Israeli exports.

The dollar dipped to the lowest value against the shekel last week, less than 3.4 shekels to the dollar. At that point Fischer ordered his central bank to start buying dollars to prop up the exchange rate. Fischer is a former Wall Street banker.

His interest rate cut had an immediate effect, sending the exchange rate up more than three and a half percent, to 3.52 shekels per dollar.

The drop in Israeli interest rates has been supported by the United States, where the Federal Reserve last week dropped interest rates by .75 percent. The 1.5 percent gap between interest rates in Israel and the United States is expected to encourage speculation and investment in Israeli markets.