Surprise Rate Cut By Bank Of Israel Signals Trouble Ahead

As we have mentioned here more than once, the Israeli economy may not be in as great shape as our leaders have let on. Tonight’s surprise 50 basis point cut, bringing rates down to just 3%, indicates that even the Bank of Israel is worried about a potential economic slowdown or even a recession.

With analysts lowering their ‘09 growth forecasts, Fischer who has until last week remained unrealistically optimistic, appears to have thrown in the towel an admitted that things aren’t all that rosy, and is trying to add liquidity to the Israeli banking system to try and prevent the same type of credit crisis gripping the global banking system.

While I think the local economic slowdown will continue, this aggressive move by the Bank of Israel will help stem the damage to the economy that a prolonged recession could cause.

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