JERUSALEM, Feb 26 Reuters The Bank of Israel kept interest rates steady on Monday after cutting by a quarterpoint in January, citing uncertainty over expected duration of the war in Gaza that will keep the pace of rate reductions this year gradual.

In keeping its benchmark rate at 4.5, the central bank said the war was having significant economic consequences on real activity and on the financial markets.

It has been four difficult months for Israel, Bank of Israel Governor Amir Yaron told a press conference. Beyond security issues, the war brings with it marked economic

ramifications as well. It impacts on economic activity overall and on the financial markets, and the uncertainty remains high.

Israel39;s war against Palestinian militant group Hamas began on Oct. 7 after Hamas gunmen rampaged through Israeli towns.

Yaron said that while there was great uncertainty with regard to the expected severity and duration of the war, Israel39;s economy rests on solid and resilient foundations and typically recovers after military conflicts and returns rapidly to prosperity.

One factor in holding rates this decision, he said, was higher budget spending to finance the war and which presents a risk to the continued moderation of inflation that has eased to a rate of 2.6 in January, within an official 13 target.

In January, Yaron said the pace to rate cuts would be gradual and on Monday he said that estimate was reasonable.

He said that worldwide, the inflation environment…