Five of six Bank of Israel MPC members voted to keep rate at 0.1%, minutes show

JERUSALEM (Reuters) - Five of six rate setters at the Bank of Israel voted to keep the benchmark interest rate at 0.1% on Feb. 22, minutes of the discussions showed on Monday.

“The low level of the interest rate supports a recovery of economic activity and a gradual return of inflation to the target range, particularly in view of the fact that the Bank of Israel is using other tools in the credit market and in the foreign exchange market,” the minutes said.

One committee member supported a reduction to 0.0%, citing concern over high unemployment.

Central bank officials have expressed reluctance to lower the key rate to zero or into negative territory despite a strong shekel and three lockdowns. They prefer to use other measures to stimulate the economy such as buying currency and government and corporate bonds.

“Monetary policy will have to remain accommodative in order to support economic recovery,” the minutes said.

Israel’s economy contracted 2.4% in 2020 and is expected grow at least 6% this year. The country’s inflation rate stands at -0.4%, below the official annual target of 1-3%.

Reporting by Steven Scheer and Ari Rabinovitch