Bank of Israel cuts rate by 25 bps during war

JERUSALEM (Reuters) – The Bank of Israel lowered short-term borrowing rates for the first time in nearly four years on Monday following data showing a weakening economy and easing inflation as a result of Israel’s war against Palestinian militant group Hamas.

Ahead of the decision, analysts were split, with seven expecting no move and seven projecting a 25 basis point reduction, the first reduction since April 2020.

The central bank lowered its benchmark rate by a quarter-point from 4.75% to 4.50%.

It had raised rates 10 straight times in an aggressive tightening cycle that has taken the rate from 0.1% last April before pausing in July and again in August, October and November.

The inflation rate eased to 3.3% in November from 3.7% in October but remained above an annual target range of 1%-3%. The economy is expected to contract in the fourth quarter and end 2023 with growth of 2%.

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