Israeli investors watched anxiously as the U.S. Federal Reserve on Tuesday cut interest rates by half a percentage point. This is the third such cut so far this year, and Federal Reserve Chairman Alan Greenspan indicated that if necessary, he would make further reductions to revitalize the U.S. economy.

Israeli traders seem disappointed by the reduction, as they together with most Wall Street traders, had been hoping for a cut of three-quarters of a percentage point.

The central bank also cut the discount rate, which is charged on direct Fed loans to commercial banks, by a half point to 4.5 percent. But all is not lost, economists say that another reduction in interest rates could be forthcoming before the Fed's next meeting on May 15, 2001.

Tuesday's interest rate comes as the U.S. economy faces economic difficulties. Its factory sector is widely acknowledged to be in recession, and most other sectors of its economy are facing a slow-down.

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