Israel's central bank held its benchmark interest rate steady at 1.0 percent, as expected, saying inflation is within the bank's target range, though slightly below the midpoint, while economic growth is stable and the growth rate should increase moderately next year.
The Bank of Israel (BOI), which has cut rates by 75 basis points this year, also said that recent data indicated a moderation in the rate of price rises in the housing market, though "with that, a change in trend in the housing market cannot yet be indicated."
"The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel and in the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel," the BOI said, echoing November's statement.
Over the last month, Israel's shekel has risen by 1.1 percent against the nominal effective exchange rate and from long term perspective, the BOI said there had not been any change in the trend in recent months following a market appreciation in in the first half of the year.
The BOI has been actively trying to keep down the shekel in recent months, not only by cutting interest rates but also by intervening in foreign exchange markets to help Israeli exports, which account for some 40 percent of the economy.
The BOI has said it would buy $2.1 billion this year and $3.5 billion in 2014 to offset the impact of natural gas production on the currency. Israel's shekel was trading at 3.50 to the U.S. dollar today, up 6.1 percent since end-2012.
Israel's inflation rate rose to 1.9 percent in November from October's 1.8 percent.
The BOI, which targets inflation of 1-3 percent, said inflation expectations had increased slightly this month with private forecaster's projections for the next 12 months averaging 1.8 percent while expectations derived from capital markets reached 1.6 percent.
It added that private forecasts do not expect the BOI to change rates in the next three months while data from the Telbor interest rate and makam curves show the probability of one reduction in rates in the coming three months.
Israel's Gross Domestic Product expanded by 0.5 percent in the third quarter from the second for annual growth of 3.2 percent, down from 3.8 percent in the second quarter.
"Data that became available this month indicated that the growth rate of the economy is stable, and there are even signs of some recovery in activity," the BOI said.
It noted that foreign trade data indicates a 4 percent rise in goods imports in November and a 1.5 percent decline in exports.
But the BOI added that the decline in exports followed three months of increases, so the trend continues to indicate a rise in exports, led by high-tech industries, primarily pharmaceuticals.
The BOI has forecast 2013 economic growth of 3.6 percent and 3.4 percent for 2014.
Earlier this month, the International Monetary Fund said the BOI should gradually raise interest rates if the economy grows faster than expected and the shekel's appreciation eases to avoid fueling house price rises.
The IMF forecast that Israel's economy will growth 3.5 percent in 2013 and 3.25 percent in 2014, including natural gas output.