The Bank of Israel announced Monday night that it is cutting the rate of interest it charges by three quarters of a percentage point to 1.75 percent in January. The bank cited a slowdown in growth because of the global financial crisis, noting that "some indicators even suggest a reduction in activity." The bank said the fighting in the Gaza area also has the potential to adversely affect the economy.
Another consideration is an anticipated drop in the inflation rate below government targets next year. The announcement of Israel's rate cut follows cuts in the prime rate in the United States and other countries. According to the statement, "capital markets expect further cuts in a number of leading economies."