# Expected Rate of Inflation Derived from the Capital Market, Forecasters' Inflation Expectations, and the M1 Money Supply

 19.02.2012 Expected Rate of Inflation Derived from the Capital Market, Forecasters' Inflation Expectations, and the M1 Money Supply

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Expected inflation rate (percent) M1 money supply Calculated from capital marketa Average inflation forecastsb 12 months forward Average monthly balance (NIS billion) Rate of change (percent) For first year 2.2 3.8 5.4 2.6 30.6 2.7 4.9 0.7 2.6 2.8 2.0 33.0 1.7 7.7 1.4 1.9 3.5 2.1 38.9 1.3 18.0 1.7 2.1 2.6 2.1 48.2 3.0 23.8 1.2 1.6 2.1 1.9 52.1 4.6 8.3 1.4 1.9 2.3 2.0 61.2 2.0 17.4 1.9 2.2 2.7 2.5 71.9 3.9 17.4 1.8 2.6 2.5 1.8 109.6 -0.5 52.1 2.9 2.8 2.6 2.7 114.7 2.8 4.6 2.7 2.7 2.6 2.8 116.7 2.3 1.7 3.3 3.0 2.7 3.0 116.8 1.8 8.6 3.8 3.1 2.7 3.1 114.2 -2.2 8.1 3.7 3.2 2.7 3.1 113.2 -0.9 4.9 3.1 3.0 2.5 3.1 115.6 2.1 4.8 3.2 2.9 2.5 3.1 115.8 0.2 3.9 2.9 2.9 2.6 3.0 118.9 2.6 7.6 3.0 2.8 2.7 2.9 114.2 -3.9 0.7 2.1 2.3 2.5 2.7 117.2 2.6 4.2 1.9 2.2 2.4 2.4 114.7 -2.2 0.6 1.7 2.2 2.6 2.2 114.1 -0.5 0.8 1.8 2.3 2.5 2.2 114.1 -0.1 2.3 1.9 2.4 2.5 2.3 116.7 2.3 1.7 2.3 2.4 2.5 2.2 115.8 -0.7 -0.8 2.5 2.4 2.6 2.4

 a 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: http://bankisrael.gov.il/deptdata/monetar/m1_exp_e.pdf b Simple arithmetic mean of the inflation forecasts of the commercial banks and economic consultancy companies that publish their forecasts on a regular basis. c The percentage change in the level in the current month compared with the level in the equivalent month in the previous year. d Annual data: expected inflation rate––annual averages; M1 money supply––December averages. e Monthly data: monthly averages f Money supply data are preliminary data. g 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.