Americans have expectations.

"According to the US Labor department, prices rose 3.3% in the year to the end of May, down 0.1 percentage points from the month before. Core inflation, which strips out more volatile items like food and energy prices, also slowed despite rents continuing to weigh on household budgets." "The US central bank held its target rate at 5.25% to 5.5% on Wednesday (yesterday)." BBC. "Stock markets surged Wednesday after data showed inflation slowed in May, raising hopes the Federal Reserve will cut interest rates later this year." HT. "The Federal Reserve held interest rates steady on Wednesday and pushed out the start of rate cuts to perhaps as late as December, with officials projecting only a single quarter-percentage-point for the year amid rising estimates for what it will take to keep inflation in check." "Recent progress has been slow, and Fed officials now project a slightly higher end-of-year inflation of 2.6% versus the 2.4% anticipated as of March." "India's retail inflation eased further to a 12-month low of 4.75% in May but food inflation remained elevated and almost unchanged at 8.69%, data released on Wednesday showed." ET. The Reserve Bank of India (RBI) did not wait for the figures, having decided to hold its policy rate at 6.5% in the meeting of the Monetary Policy Committee (MPC) on 7 June. The RBI "left its inflation forecast for this fiscal year unchanged at 4.5%." ET. In the US, "Median inflation expectations at the one-year-ahead horizon declined slightly to 3.2 percent from 3.3 percent, remained unchanged at the three-year-ahead horizon at 2.8 percent,...according to the May survey of Consumer Expectations." newyorkfed. org. In India, the RBI "released the results of May 2024 round of its bi-monthly inflation expectations survey of households," which showed that households are experiencing consumer price (CPI) inflation at 8%, median inflation expectations at 3 months is 9.2% and at one year is 9.9%. m.rbi.org.in. Thus, the US Fed is projecting inflation at 2.6% this year while Americans expect it to be 3.2%, a difference of 0.6%, whereas the RBI projected inflation at 4.5% while Indians expect it to be more than double at 9.9%. Why this huge difference? "The Fed's balance sheet has shrunk to around $7.5 trillion from about $9 trillion during 2022," because the Fed "has shed roughly $1.5 trillion in treasury and mortgage bonds that it accumulated during the Covid years when it was trying to stimulate the economy." "In contrast, the RBI's balance sheet has increased 11% in 2023-24 from Rs 63.45 trillion to Rs 70.48 trillion." The RBI's balance sheet has grown because "of it pursuing two conflicting objectives - trying to withdraw liquidity and at the same time attempting to shore up the rupee." Hence "monetary policy had to take a back seat to the bank's other objective of keeping the exchange rate of the rupee within an internally pre-determined band." This is the impossible trinity, wrote NR Bhusnurmath. Loose monetary policy means a higher inflation rate and that erodes the buying power of the rupee vs the dollar. Which, in turn, will increase prices of imports, including oil. The Fed is straightforward. The RBI is too clever. So, Indians have learnt not to expect anything.