The Bank of Israel released updated indicators of expected inflation derived from multiple sources, including capital-market breakeven inflation, professional inflation forecasts, banks’ internal interest rates and inflation contracts. The latest “current data” show one-year inflation expectations of 1.5% from the capital market, alongside 2.1% from the average of 12‑month-ahead forecasts and 2.0% from both internal interest rates and inflation contracts. The release also provides capital-market-implied expectations beyond the first year, with forward expectations of 1.9% for the second year and 2.3% for the third year, 2.0% for years 3–5 (forward), 1.7% for five years, and 1.7% for years 5–10 (forward). Breakeven inflation is defined as the yield differential between unindexed and CPI-indexed government bonds and is noted to embed an inflation-risk premium and potential biases linked to taxation, liquidity and market depth, with the Bank of Israel assessing that one-year-horizon biases were greater than usual in January 2024.
Bank of Israel 2025-12-22
Bank of Israel publishes updated inflation expectations measures with one-year breakeven inflation at 1.5%
The Bank of Israel released updated inflation indicators showing one-year expectations of 1.5% from the capital market, 2.1% from professional forecasts, and 2.0% from internal interest rates and inflation contracts. Forward expectations are 1.9% for the second year, 2.3% for the third year, 2.0% for years 3–5, and 1.7% for five years and years 5–10, with noted biases in one-year-horizon breakeven inflation.