/etc/profile sets INPUTRC, which causes readline to ignore ~/.inputrc. Not very popular with my users :-) One fix is to use the undocumented(!) keyword $include at the end of /etc/inputrc: $include ~/.inputrc Works for me.
The suggested fix only works for bash 2. But I consider it a bug that /bin/bash still is 1.14, anyway. :-) (The fix has no ill effects for bash 1.14 that I can see.)
This is fixed in the current setup package; /etc/inputrc is only used if $HOME/.inputrc doesn't exist.