"Yediot Ahronot" reports that Minister of Finance Yuval Steinitz is attempting for the first time to intervene on the decision of Governor of the Bank of Israel Prof. Stanley Fischer regarding the interest rate. In an extraordinary statement, during a closed meeting of senior officials at the Ministry of Finance, Steinitz reportedly said, "The Governor must not raise the interest rate for the economy just now. It will cause more harm than good."

Fischer is due to announce his decision tomorrow on whether to raise the interest rate for October from its current level of 1.75%.

Steinitz has so far refrained from expressing opinions on the issue of the interest rate but was reacting to reports that Fischer plans raising the interest rate by 25 basis points to 2% tomorrow evening.

After consulting with advisors, Steinitz decided to try and influence the decision because the Ministry of Finance fears that the sharp fall in the shekel dollar exchange rate will badly hurt exports.

Steinitz has also reportedly gathered new data to show a cooling off in the housing market, both in the number of deals and in apartment prices. He Bank of Israel plans to raise interest in order to raise mortgage rates for borrowers in order to temper demand among homebuyers.

Published by Globes, Israel business news - www.globes-online.com - on September 26, 2010

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