The Bank of Israel published an updated comparison of inflation expectations drawn from capital market breakeven inflation and other sources. The “current data” show one-year market-implied inflation expectations of 1.4%, alongside a 12-month-ahead average forecast of 1.9%, one-year expectations derived from banks’ internal interest rates of 1.7%, and one-year expectations derived from inflation contracts of 1.6%. The release presents market-based expectations across multiple horizons, including 1.9% over five years and 2.3% for the five-to-ten-year forward rate, with forward expectations derived from breakeven inflation at different maturities. It reiterates that breakeven inflation (the yield differential between unindexed and CPI-indexed government bonds) embeds an inflation-risk premium and can be affected by taxation, liquidity, and market-depth differences, noting that one-year horizon biases were assessed as greater than usual in January 2024; the dataset includes annual readings for 2021–2025 and monthly readings for 2025.
Bank of Israel 2026-01-20
Bank of Israel publishes updated inflation expectations indicators with one-year breakeven inflation at 1.4%
The Bank of Israel released an updated comparison of inflation expectations, highlighting one-year market-implied inflation at 1.4% and a 12-month-ahead average forecast of 1.9%. The report also details five-year expectations at 1.9% and five-to-ten-year forward rates at 2.3%, noting that breakeven inflation includes an inflation-risk premium and can be influenced by taxation, liquidity, and market-depth differences.