A higher-than-expected inflation rate for April dropped the shekel-dollar rate close to its 11-year low Thursday evening, with the dollar trading as low as 3.38 shekels. The rate was 3.50 as recently as a month ago. The consumer price index for April was 1.5 percent, bringing the inflation rate for the last 12 months to 4.7 percent and far beyond the three percent maximum target set by the Finance Ministry and the Bank of Israel.
Analysts said that the sharp increase might force Bank of Israel Governor Prof. Stanley Fischer to raise interest rates to combat inflation, but doing so would force the exchange rate down even further and damage exports. One factor working in his favor of holding interest rates steady is the previously announced Bank's policy of selling shekels and buying dollars in order to keep the shekel-dollar rate from dropping further.