As regards their short-term inflation forecast, as more information becomes available, the forecasters revise their forecasts to incorporate the latest information and the revised quarter ahead forecasts tend to converge to the actual numbers (Chart 4). Sixth, professional forecasters’ long-run inflation expectations have been influenced by the trend in actual inflation.
In the last quarter of 2007–08, the 5-year (10-year) WPI inflation expectations at 5 per cent (4.5 per cent) was aligned to the Reserve Bank’s comfort level. The consumer price (CPI-IW) inflation expectation was slightly higher at 5.5 per cent (5.0 per cent). With the persistence of near double- digit inflation in 2010 and 2011, the medium- and long-term inflation expectations have risen.