The first is a variant of adaptive behaviour wherein expectations are formed by extrapolating the past and current experience into the future. Apart from the past experience, people do factor in new generally available information. For example, in our case if the monsoon rains are deficient people may expect higher food inflation and, hence, higher overall inflation.
At the same time, economic agents learn from their past errors in projecting inflation and take that into account in forming their expectations. However, people may not change their expectations  1  Curtin, R. (2010), “Inflation expectations and empirical tests”, in Inflation Expectations, Peter Sinclair (eds), Routledge. BIS central bankers’ speeches  1  continuously, but may stagger their revisions periodically.