account the main risks to the economy as presented in the situational picture that was formulated, including in view of the continued decline in exports, the continued deviation of inflation from the target range, and the financial risks derived from the mortgage market. this policy has served, and continues to serve, in achieving policy targets, chiefly the return of inflation to within the target range, and support of economic activity and of employment. the macroeconomic picture that arises from the updated forecast, as well as the state of the labor market as shown by employment and wage figures, are positive, certainly when taking into account that the state of the global economy is far from one of high growth. the relatively good macroeconomic situation provides a fitting time to focus on solving fundamental problems in the israeli economy that may have an effect on its ability to achieve inclusive and sustainable growth. chief among those are increasing productivity, improving human capital, reducing bureaucracy, and dealing with the long - term implications of expected demographic developments. 4 / 4 bis central bankers'speeches

domestic economy. after all of these are put together into the “ oven ”, the raw forecast emerges. but this is not the forecast that is presented to policy makers or the public. the economists examine the result, 2 / 4 bis central bankers'speeches and exercise judgement regarding the likelihood of various variables, factors that the models do not cover, and more. the final result is the forecast that was published two days ago and is presented before you. this forecast serves as an ingredient — important though not exclusive — in the formulation of the situational assessment that forms the basis for the monetary committee ’ s decisions. the forecast indicates expected growth of 3. 5 percent this year ( as we said, the past is still before us ), 3. 2 percent in 2017 and 3. 1 percent in 2018. it indicates a gradual slowdown in private consumption after an exceptional increase this year, growth in public consumption of more than 4 percent this year and 1. 5 percent in the next two years, in line with the two - year budget, and a gradual acceleration of exports supported by a gradual recovery that the international organizations project in world trade. together with the central scenario in the forecast, the research department also presents the uncertainty that exists in the forecast. this is illustrated by a fan chart, which shows 66 percent of the distribution of possible outcomes. the uncertainty in the forecast is derived from uncertainty in the exogenous variables inserted into the model, chiefly in relation to the global environment. by the end of 2017, the breadth of outcomes ranges from growth of slightly more than 2 percent to about 4. 5 percent. another important component in assessing the picture based on which policy is formulated is the development of the relevant exchange rate ( the effective exchange rate ), which has been in a trend of appreciation for the past two years. this was affected not only by basic economic forces, but also by the very accommodative policies of our main trading partners ( which, according to the updated assessment of the federal funds rate, is expected to become less accommodative in the coming year ). according to the forecast, inflation is expected to return to within the target range in 2017, but the range of uncertainty surrounding the timing of that return to the range is broad. in addition to the forecast regarding the macroeconomic picture, the forecast presented by the research department to the committee also includes the path of the interest rate that is consistent with the macroeconomic picture emerging from the forecast and that supports