India’s other inflation measure, Wholesale Price Index (WPI), has been contracting since April 2020. (See Chart 1)To be sure, this is not the first instance of divergence between the two inflation measures. Inflation expectations of households are still high ...Inflation expectations of households have come down compared to what they were six-seven years ago. RBI data also shows that trajectory of current and future inflation expectation for households has been almost identical in India. (See Chart 4)What does one make of the fact that households’ inflation expectations have remained at 6% plus levels over the last four years?

Source: Hindustan Times August 23, 2020 21:56 UTC