JERUSALEM Israel's inflation rate eased to a 16-month month low of 3.3% in July from 4.2% in June, a drop that could continue to keep further Bank of Israel interest rate hikes at bay.

The consumer price index (CPI) rose 0.3% in July from June, led by gains in fresh produce, housing rentals, food and transportation costs.

Economists polled by Reuters had on average expected a 0.4% monthly rise and a 3.5% annual rate, which still remains above the government's 1%-3% target range.

The Bank of Israel is due to decide on interest rates on Sept. 4. It left its benchmark interest rate at 4.75% in July after 10 straight increases that took the rate from 0.1% in April 2022.

(Reporting by Steven Scheer; Editing by Alison Williams)