The Bank of Israel announced on Monday that the interest it charges commercial banks will stay at half of a percent in August. The bank added that it will stop purchasing government bonds but will continue the purchase of foreign currencies. The two moves are intended to strike a balance "between the pressures raising prices" and "the assessment that the economy has not yet emerged from the recession."
The bank cited a 3.6 percent inflation rate in the 12 months preceding the unexpected .9 percent consumer price index for June and a forecast at the upper end of the government's target range for the coming year as a reason for the decision. It noted that the increase in the Value Added Tax and government-supervised prices will make the CPI high during August and September.
The bank said it will hang on to the bonds it bought since the end of March, saying that the purchases "helped the capital market to return to more normal functioning, particularly with regard to the renewal of issues and raising capital by the business sector."