The Bank of Israel on Monday left interest rates on hold at four percent as heightened fears over potential hostilities with Iran took precedence over lower borrowing costs for households and businesses.

“Geopolitical uncertainty has resurfaced in recent days, in view of a potential confrontation with Iran,” the central bank said. “There still remain several risks for a renewed increase of inflation: geopolitical developments and their impact on economic activity, an increase in demand alongside supply constraints, and fiscal developments.”

US and Iranian diplomats are expected to meet in Geneva on Thursday for a third round of talks over Tehran’s nuclear ambitions, while the US continues to amass forces in the Middle East for a possible strike. Iran has threatened that, if the US attacks, it will respond with strikes on US military interests in the region and on Israel.

In January, the central bank cut borrowing costs by 25 basis points from 4.25% to 4%. In its previous rate decision in November, it had lowered the benchmark lending rate for the first time in almost two years to 4.25% from 4.5%, following a ceasefire agreement with the Hamas terror group.

Finance Minister Bezalel Smotrich slammed Bank of Israel Governor Amir Yaron for leaving interest rates unchanged, calling it a “wrong decision.” Smotrich urged Yaron to reverse the decision and continue the trend of lowering borrowing........

© The Times of Israel