Bank of Israel - Press Releases - The Expected Rate of Inflation Derived from Various Sources (Periodic average, percent)
Central bank: boi | Type: statement | Date: 2019-07-18

Calculated
 from capital market1
Average of
 the inflation forecasts for the 12 months ahead4
One-year
 inflation expectations derived from internal interest rates5
One-year
 expectations derived from inflation contracts7

Forward expectations are the expectations for the inflation rate over a future period. The forward rates—exp(j,k)—are derived from the breakeven inflation for j years and k years. That is:
Where exp(j,k) is the forward expectations for inflation from the end of year j to the end of year k. For example, exp(3,5) is the expected rate of inflation from the end of the third year to the end of the fifth year. Exp(k) is the inflation expectation for k years—for example, for 5 years. All expectations data are presented in annual terms.
2Forward expectations for full years, from the end of the third year to the end of the fifth year.
3Forward expectations for full years, from the end of the fifth year to the end of the tenth year.
4The simple arithmetic mean of the inflation forecasts of commercial banks and economic consulting companies that provide their forecasts to the Bank of Israel on a regular basis.
5Expectations derived from the internal interest rates of the five large banks, calculated as the ratio between unindexed interest rates and CPI-indexed interest rates. The internal interest rate is calculated for each bank as the average of its marginal price for raising funds (deposits) and its marginal price for allocating uses (credit).
6For expectations derived from the capital market and expectations based on internal interest rates—average for the CPI month (from the previous CPI reading through the most recent figure prior to the publication of the current CPI); forecasts—the average of forecasts which were revised after the CPI was published.
7One-year expectations derived from inflation contracts—based on the average of market quotes.​​​