UPDATE 1-Bank of Israel holds key rate at 1 pct, trims growth forecasts
(Adds central bank statement, analyst comments, shekel reaction)
JERUSALEM Dec 23 (Reuters) - The Bank of Israel held its benchmark interest rate at 1.0 percent for a third straight month on Monday and forecast slightly slower economic growth in 2014.
The central bank said new data indicated stable economic growth with "signs of some recovery in activity, including exports" as well as a tame inflation environment and slower housing price rises.
"In light of a moderation in housing prices, stability in the effective exchange rate the past few months, expectations ... of moderate economic growth next year, and the absence of risks to inflation or deflation, there was no urgency to lower rates today," said Ayelet Nir, chief economist at the Psagot brokerage.
All 15 economists polled by Reuters had expected no move.
Analysts largely believe the easing cycle that began in September 2011 when the key rate was at 3.25 percent is over, especially since the U.S. Federal Reserve's decision to start paring its bond-buying programme has taken some upward pressure off the shekel's exchange rate against the dollar.
After the Israeli central bank's announcement, the shekel strengthened to 3.48 per dollar - a more than two-year high - from its fixing of 3.5030. The shekel has gained some 7 percent so far in 2013, one of the best performances of emerging market currencies.
However, "from a longer term perspective, after marked appreciation in the first half of the year, there has not been a trend of change in the effective exchange rate in recent months," the Bank of Israel said in a statement.
It last cut its key rate in September after the shekel had appreciated and the export-dependent economy slowed. At the next two meetings, the monetary policy committee voted 5-0 to leave rates steady.
Israel's economy grew in the third quarter at an annualised pace of 2.2 percent, which new central bank Governor Karnit Flug had described as "disappointing".
The central bank forecast Israeli economic growth of 3.3 percent in 2014, down from a prior estimate of 3.4 percent. Excluding the impact from natural gas production, which began in late March, growth is projected at 2.9 percent.
The economy, it said, will grow 3.5 percent this year - or 2.6 percent excluding gas - versus a prior forecast of 3.6 percent. The bank's economists also foresee the key rate rising by a quarter-point "toward the end of 2014".
Israel's annual inflation rate edged higher to 1.9 percent in November from 1.8 percent in October to stay just below the midpoint of the government's target range of 1-3 percent. Based on bond yields, inflation is expected to ease to around 1.5 percent in the next year.
The central bank also said that while house price rises had moderated, it was too soon to call a change in trend.
For the central bank statement on its rate decision, click on: here
For the staff forecast, click on: here
(Reporting by Steven Scheer; Editing by Ruth Pitchford)
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