The governor of the Bank of Israel announced a 1.5 percent cut in interest rates this week, after the government approved an economic package to cut both the budget and income taxes by a total of some $700 million.
Share prices on the Tel Aviv Stack Exchange responded positively to Sunday’s announcement by the bank’s governor, Jacob Frenkel, with both main trading indices up by more than 6 percent at the end of trading.
Prime Minister Yitzhak Rabin welcomed the interest-rate reduction, saying it would help fight inflation and ease the tax burden on Israelis.
Economic observers called the latest developments a victory for Frenkel, who had insisted that any reduction in the interest rate be accompanied by budget and tax cuts.
The bank of Israel’s prime lending rate currently stands at about 16.3 percent.
The bank has been keeping interest rates high as an anti-inflationary measure, but critics argue that the policy risks inducing a recession.
Frenkel said at a news conference in Jerusalem that the interest rate cut would start taking effect during the last week of March.
Earlier Sunday, the government approved an economic package that will cut some $300 million from this year’s $49 billion budget.
The government also approved some $400 million in tax cuts that were slated to take effect in September.
The plan also pares down the work force in government and state-run institutions by 2 percent.
JTA has documented Jewish history in real-time for over a century. Keep our journalism strong by joining us in supporting independent, award-winning reporting.
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
