The Bank of Israel published an updated statistical snapshot of inflation expectations derived from multiple sources, including capital-market breakeven inflation, a survey average of professional forecasts, expectations implied by banks’ internal interest rates and one-year expectations from inflation contracts. The latest “current data” show one-year inflation expectations from the government bond market at 1.9 percent, with the 12-month-ahead forecast average and the internal-interest-rate measure both at 2.0 percent, and one-year expectations from inflation contracts at 1.9 percent. The release reiterates that capital-market breakeven inflation is calculated from the yield spread between unindexed and CPI-indexed government bonds and may embed an inflation risk premium and biases linked to taxation, liquidity and market depth, noting that such biases for a one-year horizon were greater than usual in January 2024. Across the term structure in the current data, forward expectations are 2.0 percent for the second and third years and 2.0 percent for years 3–5, with five-year expectations at 2.0 percent and five-to-ten-year forward expectations at 2.3 percent; the historical table shows one-year market-based expectations declining from 3.2 percent in January 2024 to 2.4 percent in December 2024 and reaching 1.6–1.8 percent through much of mid-2025 before rising to 1.9 percent in the current reading.
Bank of Israel 2025-10-21
Bank of Israel updates inflation expectations indicators with one-year market breakeven at 1.9 percent
The Bank of Israel's updated inflation expectations show one-year expectations from the government bond market at 1.9%, with the 12-month-ahead forecast average and internal-interest-rate measure at 2.0%. Forward expectations are 2.0% for the second and third years, 2.0% for years 3–5, and 2.3% for five-to-ten-year horizons, with historical data indicating a decline from 3.2% in January 2024 to 1.9% currently.