Shekel Gains vs. Dollar as Israeli Central Bank Prefers to Keep Rates Stable

The Israeli new shekel gained against the US dollar (but fell versus the euro) as the nation’s central bank refrained from cutting interest rates at today’s policy meeting even though Israel’s economy is struggling.

The Bank of Israel maintained its key interest rate at 0.1 percent today. While such decision was in line with expectations of most market analysts, economists were criticizing the decision. For example, Eldad Tamir, chief executive of the Tamir Fishman brokerage, said:

The Bank of Israel’s decision to leave interest rates unchanged is a serious mistake that throws the Israeli economy into the global turmoil without any tools or lifelines.

Indeed, the country’s economic growth demonstrated abysmal annual economic growth of 0.3 percent in the second quarter of this year, nowhere near the forecast level of 2.7 percent. As a result, the vast majority of experts that the central bank has no choice but to reduce borrowing costs at the next meeting.

USD/ILS fell from 3.8771 to 3.8378 as of 18:50 GMT today after reaching the session high of 3.9186. Meanwhile, EUR/ILS moved higher from 4.4120 to 4.4385, and its daily maximum was at 4.5284.

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