The shekel-dollar rate continued to fall Wednesday, sinking to 3.471 and leaving Bank of Israel Governor Prof. Stanley Fischer with the difficulty of preventing damage to exports without encouraging inflation. Exporters have demanded he cut the interest rate in order to make products cheaper in terms of dollars paid by importers.
Fischer has said that reducing the interest rate would not necessarily weaken the shekel and that lower borrowing costs might encourage too much inflation. One menacing factor is the continuing rise in the price of crude oil, which has reached $108 barrel but has not yet been reflected in the price of gasoline, which will be adjusted at the end of the month.
If the American Federal Reserve Bank follows through with expectations of a cut in its lending rate by at least half a percent this week, Fischer might have to follow suit next week to keep the shekel-dollar rate from sinking further.