Despite the turmoil in stock markets around the world and in Israel, Bank of Israel Governor Karnit Flug surprised everyone by deciding to leave the September interest rate unchanged at 0.11% p.a.
Last night, the financial system increasingly expected that the bank would lower the interest rate in light of the economy's weaker-than-expected growth figures in the second quarter, and the surprising decline in market inflation expectations for the coming year.
The assessment of the unusual move was made against the backdrop of data from the last 24 hours, according to which 35 million shekels of public funds were erased on the stock exchange.
The leading indices, the Tel Aviv 25 and Tel Aviv 100, fell today by almost four percent. In response, concerns developed among the stock exchange's financial managers about continued decline.
The looming interest rate cut may spur stock market money managers to inject money into the market despite the uncertainty.
The decline in the leading indices comes against the backdrop of the global crisis, during which trillions of dollars were wiped out, as a result of concerns about the Chinese economy and its impact on other trading partners. During the crisis, the Dow Jones and Nasdaq indices on the New York Stock Exchange each fell by about three percent. Subsequently, during the day, the companies Teva lost 3.1 percent, Bank Leumi 5.0 percent, Idan Ofer's KIL 5.2 percent, Yitzhak Tshuva's Delek 4.9 percent, and the real estate companies Ashtrom and Properties and Building about 6.7 percent - the hardest hit.
As a reminder, the Bank of Israel lowered the interest rate to a historic low of 0.1% in March following the strengthening of the shekel against foreign currencies and increasing concerns about damage to exports. Since the last reduction, the shekel has strengthened again against foreign currencies, but the bank preferred not to continue its policy of interest rate cuts.
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