(MENAFN) The Bank of Israel has opted to keep its benchmark interest rate unchanged at 4.50 percent for the fourth consecutive meeting, reflecting a cautious approach amidst ongoing geopolitical challenges, including Israel's extended conflict with Hamas. This decision follows a 25 basis point rate cut in January, which was prompted by subdued inflation and economic slowdown attributed to the conflict. Despite expectations from analysts for a stable rate, the bank maintained its policy stance in February, April, and May, prioritizing market stability and economic resilience.

Amidst the ongoing conflict, the central bank emphasized its commitment to stabilizing financial markets and reducing uncertainty, alongside its goals of maintaining price stability and supporting economic growth. The future direction of interest rates, according to the bank, will hinge on inflation proximity to its target range and the continued stability of financial markets, economic activity, and fiscal policies.

Updating its economic forecasts, the Bank of Israel's research department revised GDP growth projections downwards, anticipating 1.5 percent growth in 2024 and 4.2 percent in 2025, compared to previous estimates released in April. Inflation remains within the bank's target range of 1 to 3 percent, holding steady at 2.8 percent as of May, following a slight increase from 2.5 percent in February.

The Israeli economy demonstrated resilience in the first quarter of the year, posting a notable annual growth rate of 14.4 percent on a quarterly basis, rebounding strongly from the contraction experienced in the final quarter of the previous year due to the outbreak of hostilities on October 7th.

In summary, the Bank of Israel's decision to maintain interest rates reflects a balanced approach aimed at supporting economic recovery amidst external challenges, while closely monitoring inflation dynamics and ensuring stability in financial markets amid ongoing geopolitical tensions.

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