The Bank of Israel's monetary committee maintained the bank's interest rate at 0.1%, saying inflation is still trending below the target despite rising expectations.

The nation's consumer price index declined by 0.5% in January, the bank said, with lower inflation forecast for the next two months.

The central bank said, however, that inflation expectations rose last month, adding that if the depreciation of the shekel persists, inflation will likely increase.

"Since the last interest rate decision, the shekel has weakened by 3.1 percent in terms of the effective exchange rate, and by 1.6 percent against the dollar," the bank said. "In January, the Bank of Israel intervened in the foreign exchange market, buying $1.8 billion."

The bank also noted Israel's expanding economy, which grew by 3.6% in the fourth quarter of 2017, solidifying improvement in global economic activity and declining home prices.

As of Feb. 23, US$1 was equivalent to 3.49 new Israeli shekels