Wednesday November 4, 10:24 AM
Israel rates to balance inflation, growth -Fischer
JERUSALEM, Nov 4 (Reuters) - Israel's monetary policy represents a challenge in balancing an aim of low inflation while helping the economy emerge from a recession, Bank of Israel Governor Stanley Fischer said on Wednesday.
'The sharp and rapid change in the economic environment confronts monetary policy with a new challenge -- to strike a balance between the aim of supporting the still fragile real recovery, and considerations of price stability and financial stability,' Fischer (FI-N.SW - news) said in a letter accompanying the bank's quarterly inflation report.
He noted that policy needs to take into account indications of increases in prices of commodities, services, assets and housing.
Fischer said monetary policy decisions -- which include occasional intervention in the foreign exchange market to prevent the shekel from strengthening too much -- 'will be taken in light of ongoing assessments of these opposite trends'.
On the heels of the global economic downturn that pushed Israel into a recession and on expectations that inflation would slide to below an official annual target range of 1-3 percent, Fischer has chopped Israel's key rate to 0.5 percent from 4.25 percent.
Signs of an economic recovery and inflation above 3 percent led Fischer -- who decides policy -- to raise the key rate by a quarter-point in August to 0.75 percent. He has left the rate steady in September and October.
'The interest rate is still low, particularly in light of the improved economic situation, and it is aimed at continuing support for the recovery, which has not run its course,' Fischer said in the report.
The Bank of Israel expects zero growth in Israel's economy this year.
Israeli inflation slipped to an annual rate of 2.8 percent in September after spending most of 2009 in a range of 3.1 to 3.6 percent.
(Reporting by Steven Scheer; editing by Patrick Graham) Keywords: ISRAEL FISCHER/
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