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The Bank of Israel announced today it will cut interest on central bank sources by 0.2% to 8% for January 2001, in keeping with most forecasts.

The cut is the twelfth reduction in 14 months. The cuts have pared domestic interest rates by 3.5% since November 1999.

The central bank said the rate cut is in line with the governmment's multiyear target of achieving price stability, defined as anual inflation of 1% to 3%. Inflation for 2000 is expected to be close to zero, the lowest level in Israel's history and far below the government's inflation target for the year, which stood at 3% to 4%.

Today Prof. Leo Leidermann, former chief of the Bank of Israel's research department, predicted that Israel's economy would be hard pressed to grow by more than 3% in 2001. But he told


that both external and domestic conditions supported further rate cuts, possibly at a faster rate than the gradual erosion policy of the last year and more. He said that in some months the key lending rate could be cut by as much as 0.5%.