The Bank of Israel maintained its benchmark interest rate at 0.25% and hinted at a possible cut to spur inflation and support the domestic economy.
Inflation in the past 12 months stood at 0.6% in August, well below the target range of 1% to 3%. The central bank pointed to the appreciation of the shekel as a major factor in Israel's persistently low inflation rate, and predicts that inflation will be at 1.2% in 2020, 40 basis points lower than its previous forecast.
The low inflation and strengthening shekel, coupled with accommodative moves by central banks abroad and the slowing global economy, means "it will be necessary to leave the interest rate at its current level for a prolonged period, or to reduce it" to help bring inflation into the target range and support continued economic growth, the Bank of Israel said.
"If necessary, the [monetary policy committee] will take additional steps to make monetary policy even more accommodative," the central bank added.
The latest monetary policy decision "was not easy, and was not unanimous," Governor Amir Yaron said at a press briefing. He added the central bank does not rule out cutting rates all the way into negative territory, saying such a move "certainly is one of the tools in our toolbox," Reuters reported.
As of Oct. 8, US$1 is equivalent to 3.51 Israeli shekels.
