Bank of Israel keeps rates on hold as Gaza war endures

JERUSALEM, Sept 29 (Reuters) - The Bank of Israel left short-term interest rates unchanged on Monday after inflation eased further in August, remaining cautious amid economic uncertainty due to the two-year old war between Israel and Palestinian Islamist group Hamas in Gaza.

The central bank left its benchmark rate at 4.50% for the 14th meeting in a row.

Its last move was to reduce the rate by 25 basis points in January 2024 after inflation eased and economic growth slowed in the early days of the Gaza war. It has kept policy steady since then and said it is in no rush to ease again while inflation remains at the upper bound its target.

Nine of 12 analysts polled by Reuters had expected no rate move on Monday. Three predicted a 25 basis points rate cut on the heels of declining price pressures.

Israel's annual inflation rate eased to 2.9% in August from 3.1% in July, moving back to within the government's 1-3% annual target. At the same time, the economy contracted an annualised 4% in the second quarter. (Reporting by Steven Scheer; Editing by Toby Chopra)