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Israel may cut lending rates to 0.5 percent

THE Bank of Israel will probably lower its benchmark lending rate today to a record 0.5 percent as Governor Stanley Fischer seeks to shore up flagging economic growth.

The rate will be cut by half a point from 1 percent, according to seven out of eight economists surveyed by Bloomberg News. The other expects a reduction of three-quarters of a point.

"Fischer has hinted he doesn't want to hit zero," said Jonathan Katz, a Jerusalem-based economist at HSBC Holdings Plc. "There are two likely scenarios. One is that he'll cut by 0.75 point and that will be the bottom. The other is that he'll cut half a point and a further quarter point the following month. I think he'll do the latter."

Fischer has reduced the base rate by 3.25 points since the start of October as the economy slows, Bloomberg News reported. The economy will probably contract 0.2 percent this year, its first decline since 2002, according to the central bank.


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