Bank of Israel governor David Klein said in a press conference this morning that he will not raise interest rates at this time, although he continues to follow events on the financial markets closely.

Klein told reporters "I think it is too early to pass judgment and change monetary policy." He noted that there has been a steady increase in inflationary expectations from 2.4% to 4.4% over recent months.

The governor went on to explain that central banks do not change policy if there are signs of prices coming to stability. However, if there is a threat to price stability, such as devaluation, then changes in interest rates and monetary policy must be considered earlier than the regularly scheduled announcements.

He explained that Bank of Israel does not want to create rapid revaluation as occurred in the early months of 1999 following several lending rate hikes in late 1998, but would not allow rapid inflation.