WASHINGTON - US President Barack Obama on Tuesday said he was encouraged by reports of a partial halt of Israeli settlement activity on Palestinian lands as a sign that his administrations efforts to rejuvenate the Middle East peace process were finding traction. There has been movement in the right direction, Obama said during a meeting with Egyptian President Hosni Mubarak. I am encouraged by some of the things I am seeing on the ground. While many analysts suggested Obamas talks with Israeli Prime Minister Benjamin Netanyahu in May were chilly and unproductive, the U.S. president insisted that was not the case. I think the Israeli government has taken its discussions with us very seriously, Obama said. My hope is we are going to see movement not just from the Israelis but from the Palestinians around issues of incitement and security and from Arab states that show their real willingness to engage Israel. If all sides are willing to move off of the rut that were in currently, then I think there is an extraordinary opportunity to make progress. American press reports said Tuesday that Israel has not issued new construction permits in settlement areas for months. Israels housing minister was quoted as saying in a TV interview that a waiting period had been imposed in order to advance U.S.-led peace efforts, though he insisted it was not a formal moratorium. Mubarak did not comment directly on the Israeli move, though he said he has had good talks with Israeli leaders. But the Egyptian president said he told Obama that Israeli suggestions of an interim agreement with the Palestinians were not viable. This issue has been going on 60 years, and we cannot afford wasting more time because violence will increase, the 81-year-old Mubarak said, speaking through an interpreter. We need to move to the final status solution. The Israelis said talk about a temporary solution. I told them, 'No, forget about the temporary solution, forget about temporary borders. Thats why I came today to talk to President Obama to move forward on this issue. Mubaraks visit was his first to the Oval Office in more than seven years. President George W. Bushs public emphasis on promoting democracy in the Middle East which often focused on freer elections in Egypt and the release of political prisoners there led to a decided chill in U.S.-Egyptian relations. Since taking office, Obama has made a concerted effort to improve relations a point he alluded to Tuesday. What I can say is different from the United States's perspective is that even in the midst of the worst financial crisis since the Great Depression, we started dealing with this issue on Day One, Obama said. We didn't wait until year six or year seven, after I had been reelected, before we started taking this on. We started dealing with this issue immediately. The White House gave added prestige to the Mubarak government by choosing Cairo as the site of a highly anticipated speech Obama made to the Muslim world in June. The address was seen as solidifying Mubaraks view of Egypt as a pivotal player in the Middle East, though analysts said the country won the address largely because other venues were ruled out as unsafe or unfeasible. When cameras were allowed into the Oval Office on Tuesday, Mubarak was quick to mention the Cairo trip and to gush over his hosts speech. It was a very strong address, and it removed all doubts about the United States and the Muslim world, the Egyptian president said. His great, fantastic address there has removed all those doubts. During his return to the White House on Tuesday, Mubarak alluded to the chilliness, even as he dismissed its significance. Despite some of the hoops we had with previous administrations, this did not change the nature of our bilateral relations, Mubarak said. The two-day visit by Mubarak, who has been in power for nearly 28 years, came amid mounting speculation over an eventual succession in Egypt, fueled both by his evident frailty and a recent government crackdown on the Muslim Brotherhood, a group that is legally banned but is tolerated and has a presence in Parliament.