Indian inflation expectations ease first time in 8 months

[NEW DELHI] Indian inflation expectations eased for the first time since May 2021 as households expect price increases to be moderate in the near-to medium-term, a survey showed after the Reserve Bank of India (RBI) kept borrowing costs steady to support economic growth.

Current inflation expectations dropped by 70 basis points to 9.7 per cent in January, according to the median in the RBI survey of 5,985 urban households.

The 3-month and one-year ahead expectations also declined by 170 and 190 basis points, respectively.

The sharp drop in price perceptions come despite jobs and incomes taking a hit from the pandemic and global crude oil hovering near a 7-year high.

The share of respondents expecting higher inflation has significantly reduced from November 2021, the survey said.

The RBI's interest-rate panel on Thursday (Feb 10) cited a benign inflation outlook for keeping monetary policy accommodative for as long as necessary to support economic growth, although consumer price-growth is currently hovering close to the central bank's 6 per cent upper tolerance limit.

Governor Shaktikanta Das said despite hardening of oil prices and sticky core inflation the transmission of input cost pressures to selling prices remained muted due to a slack in demand. "Further, as risks from Omicron wane and supply chain pressures moderate, there could be some softening of core inflation," Das said, pegging inflation next fiscal at 4.5 per cent from 5.3 per cent this year.

A separate survey showed Indian consumer sentiment continued to improve from a historic-low recorded in July 2021 as economic recovery gathered pace. BLOOMBERG