Households' inflation expectations ease: RBI survey

The Reserve Bank of India (RBI)’s quarterly survey on inflation showed households expect a much lower rate of consumer inflation, validating the central bank’s unexpected decision to cut interest rates earlier on Thursday.

The RBI released its October-December poll of 5,000 households across 16 cities on Thursday after earlier cutting its policy repo rate by 25 basis points to 7.75 per cent.

The central bank said the fall in households’ inflation expectations likely was a possible “adaptive response to the decline in headline inflation in recent months.”

The survey showed households expected consumer inflation of 8.9 per cent in the October-December quarter in the year ahead period, down sharply from 16 per cent in the previous quarter.

Meanwhile, for the three-month period, the median showed households expecting inflation at 8.3 per cent, down from 14.6 per cent in the previous quarter.

Those expectations are still well above the actual level of inflation, with data on Monday showing the consumer price index rose 5.0 per cent in December.

The survey also showed 79.8 per cent of respondents expect prices to increase over a one-year period, lower than the 90 per cent respondents in the previous quarter.

For the three-month ahead period, 72.4 per cent of respondents expected prices to rise compared with 86.4 per cent of respondents in the September quarter.