.........By far, the greatest concern is of forecasting a price series that has yet to stabilise. This is a point noted by both current and former RBI Governors, Raghuram Rajan and D Subbarao in recent months, suggesting the CPI series is possibly still under observation by the central bank. It has also to prove robust and dependable. For example, even when prices of volatile components fluctuate sharply, they tend to return to the previous level within a relatively short span. We do not see such mean-reversion in the CPI series so far. Alternately, could there be a secular upward trend, i.e., a shifting mean? Other than that complex processes such as these need pinning down if they exist, the danger is of forecasting inflation when the price level may be deviating from its long-run behaviour............
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