JUDGING by the actions of the Bank of Israel, Israel’s central bank, the economy is in worrying shape. The bank’s Monetary Committee, at its monthly meeting on August 25th, cut its main interest rate from 0.5% to 0.25%—the lowest on record.Few had seen the cut coming. Bond prices prior to the move had implied that there would be no change in rates for the next three months. The bank had only just cut rates by a quarter of a percentage point the month before, matching the previous record low. Furthermore, the statement accompanying July’s cut had a hawkish tone, implying that the cycle of interest-rate cuts that had begun in September 2011 was at, or near, its end.The main change since the July meeting has been the Israeli army’s latest incursion into Gaza, in response to rocket attacks on southern Israel. The hostilities have dented consumption, especially in the southern part of the country, near Gaza. Tourism, which accounts for 7% of Israel’s GDP, has slumped throughout the country, ruining this year’s peak summer season. But the Bank of Israel suggests that the fighting, and the drag on the economy it has...
from The Economist: Finance and economics http://ift.tt/XVz2gz
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