Decline in households’ inflation expectations remains unstable

In October 2017, households’ inflation expectations for one year ahead, alongside inflation observed over the last 12 months, were close to all-time lows. According to the findings of the inFOM survey commissioned by the Bank of Russia, qualitative assessments of observed and expected inflation have continued to improve.

Differences in the dynamics of qualitative and quantitative (directly measured) inflation expectations are most likely linked to peculiarities in the perception of price growth. In its commentary to the inFOM survey, the Bank of Russia remarked that households are not yet ready to believe that inflation has in fact dipped so low (3.0% in September).

In October, respondents were again asked to assess growth in the prices of three tracer commodities groups (fruit and vegetables, tea and coffee, sugar) over the last year and expectations for their price growth in the coming year. A comparison of the replies suggests that, overall, respondents apprehend inflation trends, but the level of inflation they perceive differs considerably from the official statistics.

The current inflation expectations indicate that pro-inflationary risks persist. Anchoring inflation at around 4% will create conditions which allow for a reduction in households’ inflation expectations.