Israel Inflation Expectations Hold Steady at 2% for Next Year

Bank of Israel data released Wednesday indicates that the average inflation expectations among commercial banks and economic consulting firms for the next 12 months have stabilized at 2%. While this average remains steady, some other expectation indicators have seen a slight increase compared to August.

Expectations derived from the capital market show a modest rise for the first year, reaching 1.3% from 1.2% in August. For the second year, expectations climbed to 2% from 1.9%, and for the third year, they rose to 2.1% from 2%.

Longer-term expectations, however, remained relatively stable. Projections for the period between the third and fifth years stood at 1.8%, and for five years, also at 1.8%. Expectations for the period between the fifth and tenth years were recorded at 1.9%.

Annual expectations based on domestic interest rates remained at 1.8%. The average inflation forecast from predictors for one year ahead increased to 1.8%, up from 1.7% in August.

Bank of Israel explained that the 12-month inflation expectations are based on regular submissions from commercial banks and economic consultants. Other indicators are calculated from market prices, domestic interest rates, and the bank's analyses. Capital market expectations reflect the difference between yields on government bonds linked and unlinked to the cost of living index, also incorporating inflation risk premiums and liquidity differences.