The main considerations behind the decision :

The decision to keep the interest rate for June unchanged at 1.5 percent is consistent with the gradual process of returning the interest rate to a more "normal" level, intended to position inflation firmly within the target range, and to contribute to the further recovery of economic activity, while supporting financial stability. The path of the interest rate will be determined in accordance with the inflation environment, the entrenchment of growth in Israel and globally, the rate at which the major central banks increase their interest rates, and in light of developments in the exchange rates of the shekel. At the current level of the interest rate, monetary policy continues to be expansionary.

- Following the publication of the April CPI, inflation since the beginning of the year was 0 percent, and in the last twelve months was at the upper limit of the target inflation range. The inflation rate over the last twelve months is expected to decline to the middle of the range in the next few months. Twelve-month forward inflation expectations, both of forecasters and those calculated from the capital market, remained unchanged from the previous month, and average 2.7 percent. The reductions in commodity and oil prices around the world are expected to moderate inflation in the coming months.

- Data regarding real economic activity in Israel that became available this month, in particular business sector product in the first quarter of the year and labor market data, continue to support the assessment that economic activity is on a rising trend, although there are signs of a slowing in the rate of increase in activity. The level of uncertainty increased this month against the background of concern that the debt crises in some European countries would cast a cloud over the recovery in the advanced economies, and would thus have a negative impact on economic activity in Israel.

- Interest rates of the central banks of the leading advanced economies are very low, and in light of the latest developments are expected to remain so longer than originally anticipated. In addition, some of the unconventional instruments of monetary accommodation have been reintroduced. 

- In light of the continued rapid increase in housing prices and the steep rise in housing credit, due partly to the low level of interest, and in order to moderate these trends and to support financial stability, the Supervisor of Banks today issued draft guidelines to banks to exercise strict checks on housing credit, and imposing additional provisions for housing loans with high a loan-to-value ratio.

Taking into account the above considerations, the Governor decided to leave the interest rate unchanged.

The Bank of Israel will continue to monitor Israeli and worldwide economic and financial developments, and will use the instruments available to it to achieve its objectives of price stability, the encouragement of employment and growth, and support for the stability of the financial system.

The minutes of the discussions prior to the above interest rate decision will be published on June 7, 2010. 

The decision regarding the interest rate for July 2010 will be published at 17:30 on Monday, June 28, 2010.

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