Prospects for a full-blown global currency war climbed Tuesday after the Bank of Israel on Tuesday cut its base lending rate by a quarter of a percentage point to 1.25 percent, the second such move in two weeks.
The Jewish state's central bank surprised many economists, as only six of 13 polled by Thomson Reuters expected a rate cut, Haaretz, Israel’s English-language paper of record, reported. The move was needed to “weaken the forces for appreciation of the shekel,” the bank said.
“The expansionary policy of the central banks in major advanced economies is expected to continue,” the bank said, according to Haaretz.
Growth-promoting policies such as this are in vogue. Japan’s Prime Minister Shinzo Abe has gained notoriety for his namesake effort to end stagnation in the world’s third-largest economy by, in part, cutting interest rates on the yen.