Bank of Israel cuts key rate by 50 bps to 3.25 pct

JERUSALEM, March 24 (Reuters) - Israel's central bank on Monday cut its key lending rate by half a percentage point to a record low of 3.25 percent, citing expectations that a severe global slowdown will curb Israeli growth and moderate inflation pressures.

The Bank of Israel's move was widely expected and follows an announcement last week that it would boost foreign currency reserves by about $10 billion over two years by purchasing $25 million of forex every day.

Inflation remains high in Israel, with consumer prices up 3.6 percent over the prior 12 months in February to exceed an official target range of 1 to 3 percent a year. But with the economy expected to slow in 2008, the central bank believes inflation will be closer to 2 percent by the end of the year.

The central bank said the shekel's <ILS=> strength so far this year acts to lower inflation pressures while global interest rates are falling and expected to drop further.

(Reporting by Steven Scheer; Editing by Ruth Pitchford)