The fact that the interest rate was reduced, and the extent to which this was done, was determined solely on the basis of inflation expectations and the consideration of matters pertaining to financial stability. If, because of the existence of the exchange-rate band, on the other hand, inflation could accelerate-a reasonable outcome in certain circumstances-the band would oblige us to change the interest-rate policy.
We also believe that in order to realize its potential growth, the Israeli economy - perhaps like some other small and medium-sized economies - has to be open to free movement of goods, services and capital, and to adhere to international standards of macro-economic management, including the standards for fiscal deficit and price stability.