The various reactions to the latest reduction can be explained by the economic situation of those reacting. The industrial sector, which has by and large benefited from the current economic recovery, praised the reduction. The important thing, say the industrialists, is that the direction of interest continues down. But this kind of criticism doesn't budge the Governor. In his estimation, this indicates lack of stability in the inflation process.
Inflation still has the potential for sudden acceleration.
It is therefore important, he maintains, that interest rate policy creates an atmosphere of stability and not be characterized by sharp movements, even if there may be grounds for lowering interest in larger steps, in order to alleviate the financial difficulties faced by some sectors of the economy. What could possibly change this is a severe negative effect of the recent security disturbances on economic growth, which could persuade the Governor to lower interest a little faster. At the moment, the Governor's consistent policy of gradual interest rate reductions looks preferable to the other two scenarios. Specials Support Israel's soldiers in their time of need. The Fund for Strengthening Israel's Defense.