27 May 2009

Inflation expectations drop further

7:28 am on 27 May 2009

The Reserve Bank's latest survey shows business managers' inflation expectations continue to fall.

The central bank's survey shows managers expect annual inflation to average 2.2% over the next two years, compared with 2.3% in the previous survey.

The survey also shows firms expect inflation to average 1.8% over the coming year, down 0.4 percentage points since the March survey.

At the same time, the bank released the results of its survey of household expectations, which show the median pick for what inflation will be a year from now is down 0.5 percentage points to 3.5%.

Economists say the results will come as no surprise to the Reserve Bank, which has slashed interest rates from 8.5% to 2.5% since July as inflation abates amidst the recession and the global financial crisis.