Notice the commentary for "I make peace" and "I create evil."

I make peace - I hush the contending passions of mankind; I dispose to peace, and prevent wars when I choose - a passage which proves that the most violent passions are under his control. No passions are more uncontrollable than those which lead to wars; and nowhere is there a more striking display of the Omnipotence of God than in his power to repress the pride, ambition, and spirit of revenge of conquerors and kings:

Psalm 65:7
Which stilleth the noise of the seas, the noise of their waves, and the tumult of the people.

And create evil - The parallelism here shows that this is not to be understood in the sense of all evil, but of that which is the opposite of peace and prosperity. That is, God directs judgments, disappointments, trials, and calamities; he has power to suffer the mad passions of people to rage, and to afflict nations with war; he presides over adverse as well as prosperous events. The passage does not prove that God is the author of moral evil, or sin, and such a sentiment is abhorrent to the general strain of the Bible, and to all just views of the character of a holy God. ~Barnes Notes

I make peace, and create evil - Evil is here evidently put for war and its attendant miseries. I will procure peace for the Israelites, and destroy Babylon by war. I form light, and create darkness. Now, as darkness is only the privation of light, so the evil of war is the privation of peace. ~Adam Clarke

I make peace, and create evil - peace between God and men is made by Christ, who is God over all; spiritual peace of conscience comes from God, through Christ, by the Spirit; eternal glory and happiness is of God, which saints enter into at death; peace among the saints themselves here, and with the men of the world; peace in churches, and in the world, God is the author of, even of all prosperity of every kind, which this word includes: "evil" is also from him; not the evil of sin; this is not to be found among the creatures God made; this is of men, though suffered by the Lord, and overruled by him for good: but the evil of punishment for sin, God's sore judgments, famine, pestilence, evil beasts, and the sword, or war, which latter may more especially be intended, as it is opposed to peace; this usually is the effect of sin; may be sometimes lawfully engaged in; whether on a good or bad foundation is permitted by God; moreover, all afflictions, adversities, and calamities, come under this name, and are of God. ~John Gill

Notice some related scriptures:

Job 34:29
When he giveth quietness, who then can make trouble? and when he hideth his face, who then can behold him? whether it be done against a nation, or against a man only:

Psalm 75:7
But God is the judge: he putteth down one, and setteth up another.

Ecclesiastes 7:13-14
13 Consider the work of God: for who can make that straight, which he hath made crooked?
14 In the day of prosperity be joyful, but in the day of adversity consider: God also hath set the one over against the other, to the end that man should find nothing after him.

So we see clearly that God is not creating moral evil or sin.