The Bank of Israel on Tuesday cut interest rates to the lowest level in almost four years to help stimulate postwar economic recovery and provide some relief for struggling households and businesses.

The central bank, led by Governor Amir Yaron, decided to lower borrowing costs by 25 basis points to 3.25 percent after trimming interest rates in July, May, and January.

High credit costs for borrowers have been reduced by a cumulative 1% so far this year as households and businesses struggle to make mortgage and loan repayments after more than two and a half years of hostilities on multiple fronts.

The central bank’s move comes as the annual inflation rate in July fell to a five-year low of 1.5%, well within the Bank of Israel’s 1% to 3% target range, allowing policymakers to shift focus to supporting growth in the economy.

In its announcement, the Bank of Israel raised concerns that recent growth figures for the first half of the year only “partly reflect recovery of the economy from the impact of the military operation against Iran” in late February, as “excluding production of Israeli companies abroad, activity was more moderate.”

“Current indicators of economic activity show that credit card expenditures in current prices are volatile and slightly below the long-term trend line,” the central bank said. “Foreign trade data for July indicate a moderation of goods imports following a sharp increase in May and June.”

Ahead of Tuesday’s decision, forecasters were split over whether the Bank of Israel would lower borrowing costs or take a more cautious stance and take a breather, as major central banks of advanced economies left interest rates unchanged and pressure has been mounting for rate........

© The Times of Israel