RBI survey: Household inflation expectation further comes down in December

The median household felt that the three-month ahead inflation rate will be 7.3 per cent in the December survey, compared with 8.2 per cent a month earlier. Similarly, the median one-year ahead inflation rate projection fell to 8.3 per cent in December, against 10.1 per cent in November.

“The proportion of respondents expecting the general level of prices to increase three months ahead and one year ahead declined sharply in the December 2016 round as compared with both the September and November 2016 rounds and the shift was towards decline in prices. This was observed across all product groups, but was most prominent in food products and housing,” said the RBI.

The RBI survey was conducted in 18 cities and obtained responses from 5,162 urban households in various occupational categories.

Households in Bengaluru were the most optimistic, forecasting 5.3 per cent median three-month ahead inflation expectation, followed by Lucknow households at 5.5 per cent and Delhi at 5.6 per cent. The cities which were the most pessimistic included Guwahati (13.8 per cent) Ahmedabad (10.1 per cent), Mumbai (8.6 per cent) and Jaipur (8.6 per cent).

Household inflation expectations had remained high for the past four years because of constantly high CPI inflation which crossed 10 per cent during 2011 to 2013. It is partly to bring down inflation expectation that the RBI made CPI inflation its policy anchor.