The expected rate of inflation

In the third quarter of 2018, 72 percent of individuals have the expectation of “increase in price level” in next 6 months and this response is higher by 27.2 percentage points than that of the third quarter of 2017. One fifth of consumers expects “no change in price level” in next 6 months. Compared to the previous year, this response is lower by 7.2 percentage points.

However, 7 percent of consumers have the expectation of “do not know about changes in inflation” in next 6 months, and it is lower by 12.5 percentage points than the response of the third quarter of 2017. The response of “reduction in price level” is the lowest, 1.8 percent and it is lower by 4.9 percentage points compared to the level in the previous year. As a result, consumers expect an increase in price level compared to the result in previous year and specifically, the expectation of an increase in price level in next 6 months is relatively high.

Compared to the expectations in next 6 months, the response “no change in price level in next year” is lower by approximately 6 percentage points and the expectation of increase in price level in next year is higher by approximately 4.3 percentage points. However, the response “do not know about changes in price level” is slightly higher by 0.9 percentage points.

Figure1.1. The expected inflation rate, in next 6 months and the next year

As of the third quarter of 2018, the expected rate of inflation is estimated to be 4.2 and 5.9 percent in the next 6 months and the next year, respectively. Among consumers, there is not only higher expectation of increase in price in next year, but the expected rate of inflation in next year is also higher than that in next 6 months.

Furthermore, there are small differences in expected inflation between consumers in UB and the rest of the country.  The expected inflation in the next year is 6.4 among UB consumers while this is lower by 0.8 percentage points among the consumers in rural area. There are very small difference in the expected inflation in the next 6 months between UB and rural consumers.