UPDATE 1-No Israel rate cuts while inflation high -c.bank

(Adds details, comments, background)

By Steven Scheer

JERUSALEM, Feb 10 (Reuters) - Bank of Israel Governor Stanley Fischer on Sunday rejected growing calls from politicians and businesses to cut short-term interest rates to halt a strengthening shekel <ILS=>, saying inflation pressures were too high.

"If inflation pressures fall, then we will be able to lower the interest rate," Fischer said at a news conference. "But we are in a situation where inflation is above the (1-3 percent) target rate at 3.4 percent, so we can't lower rates at a time when inflation is high and the economy is in a good situation."

He noted that inflation pressures could moderate during 2008 due to slowing growth in the United States and Europe and as oil prices should ease during the year.

Fischer recalled that the central bank in late 2001 lowered rates by 2 percentage points in one move and later was forced by a spike in inflation to sharply raise them.

"The Bank of Israel in the past has responded to pressure (to cut rates) and each time it turned out to be a mistake," he said.

Fischer raised the key lending rate last July, August and December to try and keep inflation at bay. The key rate stands at 4.25 percent.

The shekel is near a 10-year peak against the dollar, largely due to the U.S. currency's weakness versus the euro but also as Israel maintains a current account surplus in its balance of payments and as foreign investment is strong.