Household inflation expectations sequentially down, but still high: RBI survey

But the current period perception is still higher than the perceptions in the same period a year ago. Also, the perceptions continue to remain at double digit levels for the three month-ahead and a year ahead period.

“Households’ median inflation perceptions for the current period moderated by 70 basis points to 9.7 per cent in January, while the three months and one year ahead median inflation expectations also declined by 170 and 190 basis points, respectively, from the November 2021 round of the survey” the Reserve Bank said in its Thursday’s post-policy release of Households’ Inflation Expectations Survey.

“Households expect inflation to be more range bound in the near to medium term as reflected in the reduced gap between their current inflation perceptions and the future inflation expectations” the central bank said in its release.

A granular analysis of the findings indicates that the median current period expectations of inflation by Indian households at 9.7 is still higher than their January 2021 perception at 8.2 per cent. The median inflation expectations for the three-month ahead and one year ahead also continue to be higher than last year’s levels and in double digits at 10.6 per cent and 10.7 per cent respectively. Significantly the male members surveyed are more hawkish than female members. The median current period expectations of inflation by men is 10 per cent compared to 9.2 per cent by Women.

The Reserve Bank has projected inflation for 2021-22 at 5.3 per cent, at the same levels made in its December policy forecast. CPI inflation for 2022-23 is projected lower at 4.5 per cent. It expects that continuing pass through of tax cuts relating to petrol and diesel last November would help to moderate input cost pressures to some extent. “The transmission of input cost pressures to selling prices remains muted in view of the continuing slack in demand” governor Shaktikanta Das said in his statement.

The softening of food prices is providing welcome relief, RBI said. The improving prospects for food grains production and the expected easing of vegetable prices on fresh winter crop arrivals are adding further optimism. Moreover, the softening of pulses and edible oil prices is likely to continue in response to strong supply side interventions by the Government and increase in domestic production.