Daily Israel Report

Israel Becomes First to Raise Interest

Bank of Israel Governor Stanley Fischer announces 0.25% interest hike, making Israel the first to raise interest since global financial crisis hit.
By Maayana Miskin
First Publish: 8/24/2009, 8:02 PM

Israeli news photo: Flash 90

Bank of Israel Governor Stanley Fischer announced Monday evening that he would raise the interest by 0.25% to bring the rate to 0.75%. The hike is meant to prevent inflation.

Fischer's decision followed unexpectedly high inflation last month. Prices rose by an average of 1.1 percent in July, while the target rate was only 0.8-0.9 percent.

Israel will precede America and Europe in raising interest. No Western countries have raised interest since the global financial crisis began several months ago.

Fischer's move surprised analysts, most of whom had expected the Israeli rate to remain stable. Interest rates worldwide are not expected to rise for another several months. A statement accompanying the announcement said the other countries were not experiencing the same inflation as Israel.

Ori Yehudai of the Israel Industrialists Association criticized the decision, which he said could slow economic growth. “The interest in the United States is still next to nothing, and creating an interest gap is likely to strengthen the shekel, harming the recovery of Israeli exports,” he said.

Despite his criticism, Yehudai expressed trust in Fischer's ability to lead Israel's exporters out of the financial crisis. The Bank of Israel Governor has demonstrated “flexibility and creativity,” he said.