Israel springs interest rate rise

The Bank of Israel on Monday became the first leading central bank to raise interest rates since the global economic crisis intensified last September, increasing its policy rate from 0.5 per cent to 0.75 per cent.

Stanley Fischer, governor of the Jerusalem-based bank, lifted the rate in a move unexpected by many economists. The increase was the first since July 2008 for the central bank, which had cut its key rate by 3.75 points from last October to March.

The bank said its decision “strikes a balance between the need to moderate inflation and the need to continue to support the recent recovery in economic activity, given that unemployment is expected to continue increasing in the next few months. Setting the interest rate at the low level of 0.75 per cent continues to represent an expansionary monetary policy.”