Israel’s central bank first to tighten

August 24, 2009

So much for waiting for the jet lag to wear off.  Stanley Fischer, the Bank of Israel’s governor and listed as an attendee at this weekend’s Jackson Hole symposium in Wyoming, is first among central banker governors to push interest rates higher since July.

From Reuters:

The Bank of Israel said on Monday it increased its key short-term lending rate by a quarter-point to 0.75 percent to help inflation get back to its 1-3 percent target.

In doing so, it became the first major central bank to raise interest rates since the global financial crisis prompted a cycle of sharp monetary easing across the world, but analysts said other central banks were unlikely follow suit soon.

The rate increase, which was a mild surprise since most economists had believed the central bank would wait at least another month, was the first since July 2008 and came after the Bank of Israel had lowered its key rate by 3.75 points from last October to March.

(The 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,” the central bank said in a statement.

Even though it’s not expected to ignite a round of rate hikes around the globe, the tightening is noteworthy nonetheless as another sign that the worst of the financial crisis has passed.

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