Mumbai households are cautiously optimistic about inflation in the months ahead, shows a Reserve Bank of India survey. The median three-month inflation expectation for Mumbai households is 8.4 per cent, just about half of the 16.2 per cent projected by Bhubaneswar residents, the most pessimistic in the country.
Lucknow households were the most optimistic, forecasting 5.4 per cent inflation for three months ahead. Retail inflation decelerated to 5.05 per cent in August from 6.07 per cent in July as food inflation moderated, prompting the Reserve Bank of India to cut its policy rate by 25 basis points to 6.25 per cent.
The Reserve Bank of India itself projects Consumer Price Index (CPI) inflation to hover around 5 per cent by the end of the financial year. Economists, however, expect inflation to slip below 4.5 per cent three months ahead because of better monsoons, seasonal factors and better food management policies. The other cities that were most pessimistic in the RBI survey included Ahmedabad (16.1 per cent), Guwahati (15.7 per cent) and Jaipur (10.6 per cent).
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Household inflation expectations have remained high for the last 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 Reserve Bank of India made CPI inflation its policy anchor.