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This document presents the forecast of macroeconomic developments compiled by the Bank of Israel Research Department in June 2013. The forecast was presented to the Monetary Committee on June 23, 2013 during its meeting prior to the decision on the Bank of Israel interest rate for July 2013. According to the staff forecast, the rate of inflation over the next year (ending in the second quarter of 2014) will be 2.1 percent. The Bank of Israel interest rate, which was 1.25 percent when the forecast was compiled, is expected to remain at this level in the coming year. Gross domestic product (GDP) is projected to grow by 3.8 percent in 2013 and by 3.2 percent in 2014. In addition to the baseline forecast, we prepared two other scenarios. In the first one, we assumed that growth in government expenditure in 2013 beyond the expenditure rule would be slightly lower what was approved in the budget proposal. In this scenario, GDP is expected to grow slightly less in 2013 and by slightly more in 2014. In the second scenario, we assumed a more rapid retreat from the quantitative easing program in the US, which is expected to be reflected in higher interest rates worldwide and in Israel as well. The effect on activity in Israel depends on the sources for increased interest rates around the world.