The Bank of Israel published an updated compilation of expected inflation rates derived from capital-market breakevens and other sources across multiple horizons. The latest “current data” show one-year inflation expectations of 1.5% from government-bond breakevens, 1.9% from the average of professional forecasts, 1.6% from large banks’ internal interest rates, and 1.5% from inflation contracts, with market-implied expectations at 1.8% over five years and 2.2% for the five-to-ten-year forward period. Capital-market expectations are defined as the yield differential between unindexed and CPI-indexed government bonds and include an inflation-risk premium as well as potential biases linked to differences in taxation, liquidity, and market depth, with the Bank noting that one-year biases were greater than usual in January 2024. The release also explains how forward inflation expectations are derived from breakeven rates across maturities and documents how the other series are constructed, including the forecasts average from commercial banks and economic consultancies, internal-rate expectations based on the five large banks’ unindexed versus CPI-indexed rates, and inflation-contract expectations based on average market quotes.
Bank of Israel 2026-02-18
Bank of Israel updates inflation expectations indicators with one-year breakeven inflation at 1.5%
The Bank of Israel released updated inflation expectations derived from capital-market breakevens and other sources, showing one-year expectations ranging from 1.5% to 1.9% and five-to-ten-year forward expectations at 2.2%. The report details the methodology for deriving these expectations, noting significant biases in one-year breakevens in January 2024.