Households expect inflation fell in July; RBI survey shows how much median inflation perception moderated

Households expect the inflation to have moderated by as much as 80 basis points in July from the previous month, according to a survey by the Reserve Bank of India.

RBI
Reserve Bank of India (Image: REUTERS)

Households expect the inflation to have moderated by as much as 80 basis points in July from the previous month, according to a survey by the Reserve Bank of India. The RBI’s bi-monthly Household Inflation Expectation Survey showed that the consumer median inflation perception moderated to 9.3 per cent in July from 10.1 per cent in May. CPI inflation in India breached the RBI’s 6 per cent tolerance limit for the fifth month in a row in June, marginally falling from 7.04%  in May. Now, the RBI survey suggests further moderation could be on the cards.

“Median inflation expectations moderated for most categories of respondents for the current period as well as three months and one year ahead periods,” RBI data showed. For food items, the survey showed that 83.7 per cent of the respondents believe prices will increase, down from 88.4 per cent in May of this year. Further, the survey showed that three months and one-year ahead median inflation expectations have also declined by 50 bps and 60 bps, respectively, from the May 2022 round of the survey.

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The survey reading is in line with the RBI Governor’s comments last Friday that Inflation expectations have eased. “Household inflation expectations have eased, but they still remain elevated,” Governor Shaktikanta Das had said. The inflation trajectory continues to be heavily contingent upon the evolving geopolitical developments, international commodity market dynamics, global financial market developments and the spatial and temporal distribution of the south-west monsoon, he added.

RBI has kept its inflation projections for the current fiscal year at  6.7 per cent, with July-September inflation at 7.1 per cent; October-December at 6.4 per cent; and January-March 5.8 per cent, with risks evenly balanced.

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Inflation has been high not just in India but across the globe. A recent report by domestic brokerage firm Motilal Oswal highlighted that headline CPI inflation is at multi-decadal highs all across the globe. Inflation in the first half of the current calendar year was higher than the year-ago period in all nations barring Hong Kong and Malaysia. The report also highlighted that the surge in headline inflation in India is lesser than in broad Emerging and developing economies.

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