The Bank of Israel on Monday raised the interest rate by 25 basis points to 2 percent for October.
Bank of Israel Governor Stanley Fischer decided on the raise after August's consumer price index went up by 0.5 percent, as opposed to more modest predictions.
Fischer's decision to raise interest rates to 2 percent is well in line with the gradual process of returning the interest to a "normal" level and by that keeping inflation within the target range while maintaining financial stability, said the Bank of Israel.
Finance Minister Yuval Steinitz expressed his discontent from the proposed raise last week, claiming the move would damage Israel's export and currency market.
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