All five members of the Bank of Israel's Monetary Policy Committee voted to keep the benchmark interest rate unchanged at 4.5% on May 26, according to minutes of the meeting issued by the central bank on Monday, citing worries over inflation.
Discussions centred on economic activity, which continued to recover moderately, it said, against a background of high domestic and global uncertainty.
"The interest rate path will be determined in accordance with the convergence of inflation to its target, continued stability in the financial markets, economic activity, and fiscal policy," the Bank of Israel said.
The central said that Ori Heffetz, who joined the MPC on May 25, decided not to participate in the voting. The committee will return to a full six members beginning with the July 7 policy meeting.
A main concern for policymakers was a rise in the annual inflation rate to 3.6% in April, staying above its 1-3% target, although it acknowledged much of the gain was due to the impact of flights abroad.
Still, MPC members expect inflation to take longer to move back within its target.
"In the committee’s assessment, there are several risks for a possible acceleration of inflation or for its not entering the target range — the geopolitical developments and their impacts on economic activity, supply constraints, a deterioration in global terms of trade, and shekel volatility," the minutes said.
The labour market, it added, remained tight but the most recent data showed some moderation.
On May 27, Bank of Israel Governor Amir Yaron told Reuters that monetary policy needed to remain "cautious" given the uncertain geopolitical situation and near-term inflation environment, with policymakers ready to delay any rate cuts until inflation eased.
"If we don't see some of those (inflationary) corrections, it might take a little bit longer (to lower rates). And if it does take longer, we will stay restrictive for longer," he said.
