Latest RBI survey shows household inflation expectations eased 80 bps

Households' 3-month, one-year inflation expectations fell 50 bps, 60 bps

The results of the Reserve Bank of India’s July 2022 inflation expectation survey of households showed that their median inflation perception moderated by 80 basis points to 9.3 per cent.

“Their three months and one-year ahead median inflation expectations also declined by 50 bps and 60 bps, respectively, from May 2022 round of survey,” the RBI said on August 5.

The survey was conducted during July 7 to July 14 in 19 major cities and the results are based on responses from 5,935 urban households, the RBI said.

According to the central bank’s survey, median inflation expectations moderated for most categories of respondents and the portion of households expecting higher inflation has declined for all product groups from the previous survey round.

Price expectations were generally aligned with the prices of food and non-food products as well as the cost of services for both three month and one-year horizons, the survey showed.

Consumer Price Index (CPI)-based inflation has remained above the upper band of the RBI’s mandated 2-6 per cent range for six straight months up to June 2022. The June inflation print was at 7.01 per cent. The RBI’s medium-term target for CPI inflation is 4 per cent.

Upside risks to domestic inflation increased significantly after Russia’s invasion of Ukraine in late February led to a sharp rise in global commodity prices.

The RBI has raised the repo rate 140 basis points since May 2022, with the benchmark policy rate currently at 5.40 per cent.

BANK LENDING

A separate survey conducted by the RBI on bank lending in the first quarter of the current financial year showed that bankers’ assessment of loan demand for the period remained positive for all major sectors.

However, the sentiments were somewhat toned down from the level reported in the previous quarter, the RBI said.

New loans had easier terms and conditions although with some moderation across major loan categories, the survey showed.

Bank officers included in the RBI’s survey expressed optimism on loan demand from all major sectors in the current quarter, although the level of positivity was somewhat lower than the previous round.

“Sentiments on overall loan demand in the second half of 2022-23 remain upbeat across the major categories of borrowers. Bankers anticipate easier terms & conditions of loans in the upcoming quarters of 2022-23,” the RBI’s survey said.

The Bank Lending Survey captures a captures qualitative assessment and expectations of major scheduled commercial banks on credit parameters for major economic sectors.