UPDATE 1-Bank of Israel cuts key rate by 50 bps to 3.25 pct

(Adds central bank statement, shekel reaction)

By Steven Scheer

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

"The forces that served to moderate price increases last month -- mainly the higher probability of a slowdown in the global economy and the strengthening of the shekel -- continued to do so this month even more strongly," the Bank of Israel said in a statement.

A similar move a month ago came as a surprise to the markets and was not fully supported by other central bank officials.

However, Monday's announcement was widely expected and follows an announcement last week that the central bank would boost foreign currency reserves by about $10 billion over two years starting on March 24 through the purchase of $25 million of forex every day.

"The global interest rate environment has fallen and is expected to continue to fall further," the central bank said.

"Thus a reduction in the Bank of Israel interest rate is required this month too due to the moderating effect on price rises in Israel of the interest rate differentials between Israel and abroad, via the strengthening of the shekel."

The Israeli move, which takes effect on Thursday, follows the latest U.S. rate cut last week in a series totalling three percentage points since September that has reduced the U.S. benchmark to 2.25 percent.