Bank of Israel : Expected Rate of Inflation Derived from the Capital Market, Forecasters' Inflation Expectations and the Money Supply

BANK OF ISRAEL

Office of the Spokesperson and Economic Information

Press Release

January 20, 2014

Expected Rate of Inflation Derived from the Capital Market, Forecasters' Inflation Expectations, and the Money Supply

Date	Expected inflation rate (percent)				M1 money supply
	Calculated from capital market1			Average inflation forecasts2 12 months forward	Average monthly balance (NIS billion)	Rate of change (percent)
	For first year8	For second year	For third year and after			Monthly	Previous 12 months3
Annual data4:
2002	2.2	3.8	5.4	2.6	30.6	2.7	4.9
2003	0.7	2.6	2.8	2.0	33.0	1.7	7.7
2004	1.4	1.9	3.5	2.1	38.9	1.3	18.0
2005	1.7	2.1	2.6	2.1	48.2	3.0	23.8
2006	1.2	1.6	2.1	1.9	52.1	4.6	8.3
2007	1.4	1.9	2.3	2.0	61.2	2.0	17.4
2008	1.9	2.2	2.7	2.5	71.9	3.9	17.4
2009	1.8	2.6	2.5	1.8	109.6	-0.5	52.1
2010	2.9	2.8	2.7	2.7	114.7	2.8	4.6
2011	2.7	2.7	2.6	2.8	116.5	2.2	1.6
2012	2.3	2.4	2.5	2.3	126.6	2.1	8.7
2013	1.9	2.3	2.4	1.8	146.7	2.9	15.9
Monthly data5:
2013
January	2.4	2.3	2.7	1.9	126.7	0.1	10.6
February	2.6	2.1	2.5	1.9	128.2	1.2	12.2
March	2.8	2.1	2.4	1.9	131.2	2.3	15.2
April	2.1	2.0	2.3	1.8	131.4	0.1	8.8
May	1.9	2.1	2.4	1.8	132.2	0.6	10.9
June	1.6	2.1	2.4	2.0	134.9	2.1	11.6
July	1.4	2.4	2.4	1.9	138.9	2.9	13.8
August	1.4	2.3	2.4	1.8	141.1	1.6	12.7
September	1.5	2.2	2.4	1.9	144.6	2.5	13.5
October 6	1.5	2.3	2.4	1.8	143.0	-1.2	13.6
November 6	1.4	2.5	2.5	1.7	142.5	-0.3	15.0
December 6	1.6	2.7	2.4	1.7	146.7	2.9	15.9
current figure7	1.6	2.7	2.3	1.7

1 Inflation expectations are defined as the rate of inflation that would make the yields on indexed and unindexed government bonds equal (break-even inflation); they include an inflation-risk premium. An explanation for how the expectations are calculated is available at the following address:

www.boi.org.il/en/DataAndStatistics/Pages/InflationExpectationsExplanation.aspx

2 Simple arithmetic mean of the inflation forecasts of the commercial banks and economic consultancy companies that publish their forecasts on a regular basis.

3 The percentage change in the level in the current month compared with the level in the equivalent month in the previous year.

4 Annual data: expected inflation rate--annual averages; M1 money supply--December averages.

5 Monthly data: monthly averages.

6 Money supply data are preliminary data.

7 Expectations derived from the capital market--average of the CPI month (i.e., from the 16th of the previous month to the 15th of the current month). Forecasts--average of forecasts updated after the publication of the CPI.

8 Are notseasonally adjusted.

For an explanation of how the expectations are calculated:

www.boi.org.il/en/DataAndStatistics/Pages/InflationExpectationsExplanation.aspx

POB 780 Jerusalem 91007 Israel Tel. [phone] Fax [phone] www.bankisrael.org.il