Inflation Expectations in Israel Stabilize at 1.5%

SadaNews - Data published by the Bank of Israel on Monday showed that inflation expectations derived from the capital market for the upcoming year remain stable at 1.5%, unchanged compared to June, while the average expectations from commercial banks and economic consulting firms for the next 12 months increased from 1.8% to 1.9%.

According to the data, inflation expectations from the capital market for the second year rose to 1.8%, compared to 1.7% last month, while expectations for the third year remained at 1.8%, as did the projections for the period extending from the end of the third year to the end of the fifth year.

The five-year inflation expectations remained at 1.7%, while expectations for the period from the end of the fifth year to the end of the tenth year rose to 2%, compared to 1.9% in June.

The expectations derived from the internal interests of major banks remained stable at 1.6% for the coming year, while the average expectations of inflation forecasters remained at 1.5%.

The monthly comparison indicates stability in short-term inflation expectations, alongside a limited increase in some medium and long-term indicators, as various current estimates range between 1.5% and 2%.

The average capital market expectations for inflation for the upcoming year reached 1.8% in 2025, compared to 2.8% in 2024 and 3.1% in 2022, according to the annual data provided by the bank.

The Bank of Israel clarified that capital market expectations are derived from the spread between the yields of government bonds not linked to the cost of living and the yields of those linked to it, noting that it includes, in addition to inflation expectations, a risk premium and adjustments related to taxes, liquidity, and market depth.