Tuesday, November 11, 2008

US Dollar Surges on Bank of Israel Rate Cut

In a surprise move, Bank of Israel governor Stanley Fischer cut interest rates to 3%. Citing increasing challenges to the local economy and even a potential recession (maybe he read some of my posts!), Fischer made the unexpected move in order to help stem the economic slide.

With analysts lowering their '09 growth forecasts, Fischer who has until last week remained unrealistically optimistic, appears to have thrown in the towel an admitted that things aren't all that rosy, and is trying to add liquidity to the Israeli banking system to try and prevent the same type of credit crisis gripping the global banking system .

As a result of the cut, the US Dollar soared almost 2% against the Shekel. For consumers the rate cut is helpful. It will mean lower rates that you need to pay on overdraft, lower rates for loans and other types of credit. On the other hand, investors in Israeli bonds will receive less interest on their investment.

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