Israel Holds Steady: Bank Maintains Interest Rates Amid Conflict

The Bank of Israel kept interest rates unchanged despite ongoing conflict with Hamas in Gaza. The decision follows a previous rate cut and economic challenges from inflation and slowed growth. Analysts predicted this move as inflation remains above target, impacting the economic outlook.

The Bank of Israel has decided to maintain its short-term interest rates at 4.50% for the tenth consecutive meeting. This cautious stance comes as hostilities with the Palestinian Islamist group Hamas in Gaza resume following a temporary ceasefire.

The central bank previously lowered its rate by 25 basis points in January 2024 due to a slowdown in economic growth and easing inflation amid the Gaza conflict. Despite these factors, the bank is refraining from future rate reductions while inflation exceeds the target range.

As the year began with heightened taxes and increased electricity and water prices, annual inflation eased slightly to 3.4% in February from 3.8% in January. Yet, this rate continues to surpass the government's annual target of 1-3%. Economic growth has also suffered, with an annualized increase of 2.0% in the fourth quarter and just 0.9% overall for 2024, predominantly due to the ongoing war.

(With inputs from agencies.)