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Economy in Brief

Inflation Expectation For South Korea And India
by Louise Curley   May 3, 2011

Inflation expectations have been added to the Haver Data Base, EMERGEPR for South Korea and India.

The South Korea data include monthly data, starting in February 2002 on the average expected inflation rate over the next twelve months. The expected inflation rates are closely associated with the actual inflation rates, although the former tend to mitigate extreme moves of the actual data, as can be seen in the first chart. In April 2011, the expected rate of inflation over the next year was 4.0% compared with 4.2% for the actual rate of inflation. The South Korean data also include a distribution of the size of the expected inflation rates, starting in April 2008. In April, 2011, 76.6% of Koreans expected the inflation rate over the next year to be between 3.0% and 5.5%, compared with the current inflation rate of 2.66%. The actual distribution is shown below.

The Indian data include quarterly data of the 3 month and 1 year ahead General Price Expectations and the Household Inflation Expectations. The data for General Price Expectations are available only since Q1 2009 while the data for the Household Inflation Expectations are available since Q3 of 2006. Household Inflation Expectations for the 3 months and 1 year ahead compared with the current inflation rate are shown in the second chart. Over the data span, the expectations for the 1 year ahead inflation rate have been greater than the 3 month ahead rate, which, in turn, have been greater than the current inflation expectations. The Indian data also provide distributions of the responses for the 3 months and 1 year ahead expectations. In the fourth quarter of 2010, fully 98.9% of the participants expected that prices would rise over the next year, 77.4% expect the increase will be higher than the current rate, and 17.9% expect the increase would equal the current rate. Only 3.6% expected the increase would be less than the current rate, 0.9% expected no change in prices and a mere 0.3% expected prices to decline.

Inflation Expectations Next 12 Months:South Korea Apr-11 Inflation Expectations Next 12 Months: India Q4-10
Less than 0.5-1.5% 1.1% Prices increase 98.9%
1.5-2.0 2.6% Prices increase more than current rate 77.4%
2.0-2.5 4.3% Price increase equal to current rate 17.9%
2.5-3.0 7.3% Prices increase less than current rate 3.6%
3.0-3.5 12.1% No change in prices 0.9%
3.5-4.0 24.3% Prices decline 0.3%
4.0-4.5 22.1%  
4.5-5.5 18.1%  
5.5-8.0 8.1%  
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