Urban households expect inflation to be 12.9% by Sept

Urban households expect inflation to remain high till the first half of next financial year 2012-13, a survey by the Reserve Bank of India (RBI) has found.

For September 2012, household inflation is expected to be 12.9%, same as perceived for June 2012, and daily-wage workers and housewives expected higher inflation rates to continue, the survey said.

As per the 'Inflation Expectations Survey of Households: September, 2011 (Round 25)' conducted by the apex bank, the rise will be mainly on account of movement in food prices.

About 27% of respondents believe that the Reserve Bank is taking necessary action to control inflation.

While housewives surveyed expect inflation to be 13% by September 2012, daily wage workers said it would be 13.4%.

On the other hand, financial sector employees and self-employed projected inflation to be 12.3% and 12.8%, respectively, by the year-end.

"The general price expectations are observed to be more aligned with food price expectations as compared with other product groups. Around 90% of the respondents appeared to have been driven by expected changes in food prices for arriving at general price expectations," the survey said.

The survey found that households expect inflation to rise further by 120 basis points during the next 12 months from the perceived current rate of 11.7% in the July-September quarter of the current fiscal.

Headline inflation, as measured by Wholesale Price Index (WPI) has been hovering above 9% since December, 2010. It stood at 9.72% in September and 9.73% in October this year.

However, after being in double-digit for over a month, food inflation has shown a moderating trend since late October and fell to a 39-month low of 6.6% for the week ending November 26.

"From September 2010 round of the survey, household inflation expectations are higher than the official inflation rates," the survey said.

The survey was conducted in July-September 2011 and covered 4,000 urban households across 12 cities for the October-December 2011 quarter and the July 2011-June 2012 period.

The RBI and the government have forecast headline inflation to moderate to around 7% by March 2012.