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.
2025-11-18Bank of Israel
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.