Mumbai, July 24 -- The RBI released a study paper in its July bulletin to understand the Indian household inflation expectations. This study uses unit level data on 1-year ahead median inflation expectations from the Reserve Bank's Inflation Expectations Survey of Households (IESH), to understand their dynamics post pandemic, key determinants and effectiveness of monetary policy in anchoring these expectations, particularly under the flexible inflation targeting (FIT) regime.

Household inflation expectations are particularly important because households represent the largest and most diverse economic group, directly driving consumption. Unlike professional forecasters, households' expectations are often shaped by personal experiences and...