BackHousehold inflation expectations decline for 2nd month in December
The RBI's inflation expectations survey said the median expectation of inflation in three months' time has declined to 7.3% in December from 8.2% in November
Premium
Mumbai: Household inflation expectations declined for the second straight month in December, according to the Reserve Bank of India (RBI)’s latest inflation expectations survey released on Wednesday.
The survey said the median expectation of inflation in three months’ time has declined to 7.3% in December from 8.2% in November. The expected inflation one year ahead declined sharply to 8.3% in December from 10.1% in the previous month.
Only, 28.9% of respondents said that three-month-ahead inflation will quicken compared with 40.1% a quarter ago.
ALSO READ | RBI’s shift in policy stance is puzzling
RBI conducts a survey of 5,300 urban households across 18 cities and asks individuals about their inflation expectations for the coming quarter.
The central bank’s projection for headline consumer price index (CPI) inflation, however, stands at below 5% for the March quarter, with the expectation that it will rise sharply during Q3 and Q4 of FY18.
Household inflation expectations had become entrenched on the back of consistently high inflation during 2011-13, when retail inflation was in double digits.
ALSO READ | RBI signals end of rate cut cycle
To curb retail inflation, RBI shifted its policy anchor to consumer price inflation and adopted a persistent liquidity deficit maintenance framework, besides raising interest rates.
Since January 2015, given the fall in inflation, RBI has cut policy rates by a cumulative 175 basis points. A basis point is one-hundredth of a percentage point.
A separate survey of professional forecasters, by the central bank, shows that market participants expect retail inflation at 4.3% for the March quarter and to fall thereafter.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
