Israel cenbank hikes key rate 25 bps to 0.75 percent

JERUSALEM, Aug 24 - The Bank of Israel raised its key short-term borrowing rate by a quarter-point on Monday, its first rate increase in more than a year.

It became the first major central bank to raise borrowing costs in what has been a global cycle of monetary easing.

The key rate, which had fallen by 3.75 percentage points from last September through March, was increased to 0.75 percent, the first time it has been raised since July of 2008.

July consumer prices jumped a higher than expected 1.1 percent from June to stand 3.5 percent higher than year-ago levels, above an official annual target of 1 to 3 percent.

Israel's economy grew a surprising annualised 1 percent in the second quarter after contracting in the fourth quarter of 2008 and first three months of 2009.

In a Reuters poll last week, nine of 12 economists expected Bank of Israel Governor Stanley Fischer to leave rates steady. One predicted a half-point rate hike and two forecast a quarter-point move. Eight of 12 forecast a rate increase by the end of 2009.