Inflation Measurement and Inflation Expectations : The Case of Israel

Inflation in Israel has been below the inflation target for over two years now and inflation expectations at short horizons have followed actual inflation to below the target. The low inflation outturns are the result of sharp, negative external and domestic price level shocks, including the global declines in oil and other commodity prices along with some domestic policy mandated price declines. A number of other countries are also experiencing below-target inflation. This paper discusses issues and challenges for monetary policy in Israel that have arisen as a result of the prolonged effects of the negative price shocks against the background of an already highly expansionary monetary policy and relatively solid real economic developments. Full Publication: 'http://ssrn.com/abstract=2870167' Inflation Mechanisms, Expectations and Monetary Policy