Inflation to increase further, tight monetary policy imperative

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By A Staff Reporter,Kathmandu, Dec. 4: A study has shown that inflation will go much higher than the targeted limit.

According to the inflation expectation survey for the first quarter of the current fiscal year 2022/23 published by the Nepal Rastra Bank, it is seen that inflation will increase further.

In the current fiscal year, consumer inflation has been targeted at 7 per cent, but it has reached 8.5 per cent in the first quarter.

The survey was conducted during October 9 to October 15, 2022 among individual respondents from 60 market areas of 57 cities through field interviews.

Most of them answered that the price increase may rise further.

The results are based on responses from 2,040 individuals, with additional 899 individuals in this survey compared to the number of individuals included in the previous survey.

According to the survey, 86.6 per cent of respondents have expected the price level to increase in the next three months while 95.7 per cent of respondents have expected the price level to increase over the next one year.

The share of respondents expecting price increases in the next three months has decreased from mid-July, 2022, while the share of respondents expecting price increase over the next one year has slightly increased.

The share of respondents expecting price increases in food and sub-group; non-food and services and its subgroup; and real estate (housing) during the next three months has decreased compared to that of mid-July, 2022. 

The share of respondents expecting price increases in one year ahead across the entire food products, except for cereal grains, pulses, sugar and spices and non-food and services groups has decreased compared to mid-July, 2022.

Median inflation expectation for three months ahead and one year ahead has decreased compared to mid-July, 2022. Median inflation expectations for three months and one year ahead stand at 10 per cent and 12 per cent respectively, the NRB said.

This shows that individuals expect inflation to decrease in the near term and slightly increase in the medium term.

Nepal Rastra Bank's tight monetary policy stance has played a crucial role in anchoring inflation expectations in the near and medium term, the survey said.


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