The Bank of Israel published an updated statistical table on expected inflation derived from multiple sources, spanning one-year expectations through forward measures out to 5–10 years. It compares breakeven inflation implied by the spread between unindexed and CPI-indexed government bond yields with the average of professional inflation forecasts, one-year expectations inferred from large banks’ internal interest rates, and one-year expectations from inflation contract quotes. In the latest “current data”, one-year inflation expectations stand at 1.6% from the capital market, 2.0% from the average of commercial-bank and consulting forecasts, 2.0% from internal interest rates and 2.1% from inflation contracts. Forward measures put expected inflation at 2.0% for the second year, 2.4% for the third year, 2.0% for years 3–5, and 1.8% for both the five-year horizon and years 5–10 forward. The release notes that capital-market breakevens embed an inflation-risk premium and may be biased by differences in taxation, liquidity and market depth, with one-year-horizon biases assessed as higher than usual in January 2024, and sets out the methodology for forward-rate construction and the composition of the forecast and internal-rate measures.
Bank of Israel 2025-11-18
Bank of Israel updates dashboard of inflation expectations from markets, bank internal rates and forecasts
The Bank of Israel released an updated table on expected inflation, showing one-year expectations at 1.6% from the capital market and 2.0% from professional forecasts, internal interest rates, and inflation contracts. Forward measures indicate inflation expectations of 2.0% for the second year, 2.4% for the third year, 2.0% for years 3–5, and 1.8% for the five-year and 5–10 year horizons, with noted biases in capital-market breakevens due to inflation-risk premiums and market factors.