Interest rate up 0.25% to 4%

Bank of Israel Governor Stanley Fischer has raised the interest rate for September by 0.25%, according to expectations, bringing it to 4%.

Contrary to the economists' estimates that the governor would raise the interest rate by 0.5%, Fischer preferred a more moderate raise of only 0.25% despite the rise in demands and inflation in the Israeli economy, following the expected decline in the US interest rate next month and the fluctuations in the Israeli shekel's exchange rate.

The Bank of Israel on Monday noted the proper functioning of the Israeli capital market, which does not create solvency problems in the economy, and is thus less exposed to the effects of the fluctuations in the world's markets.

The interest rates discussions were held in the past few days via a rare conference call, on a secured phone line, with the governor who is currently in the United States.

Fischer is taking part in two conferences dealing with the ramifications of the mortgage crisis in the US. He is expected to return to Israel over the weekend.