Inflation Expectation Survey

The Pakistan Institute of Development Economics (PIDE), a premier research institute of
Pakistan, has led the field in developing quality research in social sciences and informing
public policy. PIDE is an academic institution that coordinates its work plan with the
Planning Division, Government of Pakistan. Granted the degree-awarding status by the
Government of Pakistan since 2006, PIDE functions as a research body with an educational
mission. Through recent restructuring, PIDE has developed several new initiatives such as
the PIDE Working Papers, PIDE Policy Viewpoint, and a weekly PIDE Seminars series. It
has been very active in the area of opinion evolution, breaking new ground in such areas as
urban issues, governance and institutions, and civil service reform.
Inflation expectations have a central role in macroeconomic theory, by providing
direction to consumption, saving and investment decisions of economic agents.
Internationally, there is growing trend to adopt inflation targeting as the primary focus for the
conduct of monetary policy. Inflation targeting framework requires the use of inflation
expectations in monetary policy decisions. Expectations on future price movements not only
help to derive inflation projections but also enable the policymakers to design effective
policies to maintain price stability.
In monetary policy deliberations policymakers require a reliable measure to inflation
expectation to assess the outlook for future inflation and gauge the stance of current
monetary policy. The literature suggests that a survey forecasts are accurate and useful in
predicting future inflation. Moreover, inflation expectations are important in identifying
expected real interest rates that determine the level of real spending in the economy.
To provide estimates of inflation expectations in Pakistan PIDE has decided to start a
quarterly survey on inflation expectations. For this purpose we used data base of the Pakistan
Society Development Economists (PSDE) along with Economics Departments of the
Universities, financial sector employees, government and non government organizations. The
questionnaire was sent to 300 persons all over Pakistan and got 168 responses. These include
doctors (PhD), professors, bankers, bureaucrats, businessmen and young economists. These
results are therefore based on the response of those who understand details of inflation and its
causes.