The Bank of Israel left short-term interest rates unchanged for a 10th straight meeting on Monday, staying cautious as the conflict between Israel and Palestinian Islamist group Hamas in Gaza has resumed after a brief pause in the fighting.
The central bank left its benchmark rate ILINR=ECI at 4.50%.
"In view of the continuing war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity," it said in a statement following its decision.
The central bank had reduced the key rate by 25 basis points in January 2024 after inflation eased and economic growth slowed amid the Gaza war, but has kept policy steady since.
All 14 analysts polled by Reuters had expected no rate move on Monday.
US tariffs
The bank said it expected the new tariff policy announced by the US government to moderate the volume of world trade and of Israeli exports.
With taxes and electricity and water prices rising at the start of this year, the annual inflation rate ILCPIY=ECI eased to 3.4% in February from 3.8% in January but remained above the government's 1-3% annual target.
The economy grew by an annualized 2.0% in the fourth quarter and 0.9% for all of 2024 due to the war.
In the base scenario of the latest forecasts by the central bank's Research Department, also published on Monday, gross domestic product is expected to grow by 3.5% in 2025 and by 4.0% in 2026, both lower than in the January forecast.
Inflation in 2025 is expected to be 2.6%, and 2.2% in 2026.