Israeli bank notes. Photo: Pixabay.

All six rate setters at the Bank of Israel voted to keep the benchmark interest rate at 0.1% on Aug. 23, though one member believed it may be time to start tightening policy, minutes of the discussions showed on Sunday.

For the second straight meeting, the monetary policy committee voted 6-0 to leave rates unchanged.

The economy rebounded in the second quarter after most COVID-related restrictions were lifted, while inflation moved near a 2% rate.

One member, the minutes said, was of the opinion that the strong economic data and the increase in the inflation environment “could have made it possible to begin gradually reducing the extent of monetary policy accommodation.”

“However, in view of the renewed increase in morbidity, it is best to be very cautious and at this time to retain the current policy,” the minutes said, citing the view of the policymaker.

Gross domestic product (GDP) grew an annualized 15.4% in the April-June period from the prior three months, while the inflation rate reached 1.9% in July from below zero earlier in 2021.

Yet, COVID-19 infections from the Delta variant have spiked in recent weeks, despite a rapid vaccination rollout in which many adults have already received a third shot; although with the number of serious cases fairly low, officials are reluctant to impose a fourth lockdown.

“The Israeli economy’s process of recovery from the crisis continues. However, there are still challenges to economic activity, in view of the increased health risks in Israel and abroad,” the minutes said. “Therefore, the (MPC) will continue to conduct very accommodative monetary policy for a prolonged time, using a range of tools as necessary.”

Policymakers noted, “there are no signs of an outbreak of inflation,” even though prices of non-tradable items continue to rise, while the rate of increase in prices of tradable goods was stable.

At the same time, MPC members noted that economic activity returned to its long-term trend in most industries, but tourism, hospitality and culture continued to struggle.

“The committee will formulate its policy so that it will continue to provide macroeconomic support for the process of exiting the economic crisis, and will ensure that the credit market continues to function,” the minutes showed.