The Bank of Israel published updated statistics on expected inflation derived from multiple sources, combining capital-market breakeven inflation from government bonds with the average of 12‑month inflation forecasts, one-year expectations implied by the internal interest rates of the five largest banks, and one-year expectations derived from inflation contracts. The latest “current data” show one-year expectations clustered at 2.3%–2.4% across measures. On the capital-market term structure, the update reports forward expectations of 2.3% for the second year, 2.6% for the third year, and 2.7% for years 3–5, alongside 2.6% for five-year expectations and 2.6% for years 5–10 forward. The Bank reiterates that breakeven inflation, calculated from the yield gap between unindexed and CPI-indexed government bonds, includes an inflation-risk premium and may be affected by taxation and liquidity differences, noting that one-year horizon biases were greater than usual in January 2024.
Bank of Israel 2025-01-21
Bank of Israel publishes updated inflation expectations measures with one-year breakeven at 2.3%
The Bank of Israel released updated statistics on expected inflation, showing one-year expectations clustered at 2.3%–2.4% across various measures, with forward expectations ranging from 2.3% to 2.7% for different terms. The report highlights that breakeven inflation includes an inflation-risk premium and may be influenced by taxation and liquidity differences.