JERUSALEM (Reuters) - Four of the six rate setters at Israel’s central bank voted to keep the benchmark interest rate ILINR=ECI at 0.1 percent on Oct. 8, where it’s been for more than three years, minutes of the discussions showed on Monday.
However, it was the first time that two members voted for a 15-basis-point rate increase to 0.25 percent, and the committee made clear a rate hike could come at any time. In the previous five decisions, just one member had broken ranks.
“The committee assesses that in any one of the coming interest rate decisions it will be possible to raise the interest rate in accordance with the data and the manner in which the committee members analyze them,” the minutes said.
The vote was Bank of Israel Governor Karnit’s Flug final interest rate decision. Flug’s term ends next month and Wharton finance professor Amir Yaron has been selected to replace her.
The committee’s majority said that although annual inflation in the past three months has been within the government’s target range of 1 to 3 percent, it was still too early to say if it was “entrenched” within the target.
They also noted that the inflation rate is expected to decline temporarily below the target.
“They assessed that over the coming months conditions for raising the interest rate may come into place, but that the path of increasing the interest rate will be moderate, so as not to disrupt the entrenchment of the inflation rate within the Bank of Israel target,” according to the minutes.
Israel’s inflation rate reached 1.2 percent in September.
The two members who supported a rate increase to 0.25 percent noted that the low inflation rate in Israel does not reflect weakness in demand and pointed out inflation’s upward trend.
The bank’s own economists have forecast rates will be raised only next year and will end 2019 at 0.5 percent.
Reporting by Ari Rabinovitch and Tova Cohen, editing by Larry King