Bank of Israel Governor Stanley Fischer decided Monday to keep the interest rate unchanged in January 2011, at 2%.
This marked the third month in a row where Fischer kept the interest rate in place, after raising it six times since September of last year, for a cumulative increase of 1.5%.
This time around, the decision was based on encouraging inflation data published in the last two weeks, with expected annual inflation being adjusted to 3.1%, down from 3.2% in November. Meanwhile, rent prices also reminded largely unchanged and even slightly decreased.
However, the most significant aspect behind the governor's decision was the fears of further valuation of the shekel vis-à-vis the dollar and euro. Bank of Israel officials are well aware that a further boost of the interest rate in Israel without a similar move being undertaken in the United States and European Union makes the shekel increasingly attractive, thereby boosting it further and hurting Israeli exporters.
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