The Bank of Israel announced on Monday that it is keeping the interest it charges other banks at 1.25 percent throughout March. In a statement accompanying the announcement, the bank stated the decision "is portion of the gradual process of returning interest to a more 'normal'calm [following the low levels reached in 2009 -ed.]; the process is intended to return inflation to within the target range and to contribute to the further recovery of economic activity, while supporting financial stability.

The bank says the .7 percent decline in the January consumer price index was mainly due to price reductions resulting from government decisions, including the reduction in Value-Added Tax and the cancellation of the water surcharge, as well as the second straight reduction in the housing index. Factoring out the government actions, the January inflation rate was down by 0.2 percent, "slightly above the seasonal path consistent with the inflation target.