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By JERUSALEM POST STAFF
The Bank of Israel announced Monday that it will end its program of government bond purchases and held its benchmark interest rate at a record low for a fifth month as the economy showed signs of recovery. Bank of Israel Governor Stanley Fischer's decision to leave the rate at 0.5 percent and stop bond purchases on August 5 "strikes a balance between the pressures raising prices" and the "assessment that the economy has not yet emerged from the recession," the central bank said in a statement. Higher-than-expected inflation in June, together with an improvement in key macroeconomic indicators, have increased pressure on the bank to reduce its monetary expansion. Fischer had cut the key rate by 3.75 percentage points since October as he sought to revive an economy that shrank an annualized 3.7% in the first quarter and as unemployment rose to 8.4% in May. "The central bank's actions show that they think the market is on its way to being back to normal," Arie Tal, chief analyst at Alumot-Sprint Investment House Ltd. said Monday. "They are satisfied at this point with market conditions after pushing down corporate borrowing costs." he Bank of Israel announced Monday that it will end its program of government bond purchases and held its benchmark interest rate at a record low for a fifth month as the economy showed signs of recovery. Bank of Israel Governor Stanley Fischer's decision to leave the rate at 0.5 percent and stop bond purchases on August 5 "strikes a balance between the pressures raising prices" and the "assessment that the economy has not yet emerged from the recession," the central bank said in a statement. Higher-than-expected inflation in June, together with an improvement in key macroeconomic indicators, have increased pressure on the bank to reduce its monetary expansion. Fischer had cut the key rate by 3.75 percentage points since October as he sought to revive an economy that shrank an annualized 3.7% in the first quarter and as unemployment rose to 8.4% in May.