JERUSALEM - The Bank of Israel as expected held its key interest rate at a record low of 3.5 percent for the fifth straight month on Monday, saying inflation was not a problem, even with a weaker shekel against the dollar.
Israeli inflation is forecast at 1.5 to 2 percent for 2005, well within the government's annual 1 to 3 percent target range. Economists had predcited inflation would be 2.5 percent.
The decision was the second for Stanley Fischer, the new central bank governor.
Over the first five months of the year, consumer prices were up a cumulative 0.4 percent, with prices up just 0.2 percent over the prior 12 months.
With inflation tame, most economists expect the Bank of Israel to keep rates steady until later in 2005 or early in 2006, when they are forecast to rise slightly.
The Bank of Israel said in its statement that a recent strengthening in the dollar against the shekel has not changed the bank's assessment of future inflation.
