Inflation watch: December consumer prices up just 0.1 pct

Jeannie Matthews
January 12, 2018

The government has asked the Reserve Bank of India to keep inflation at 4 per cent, plus or minus 2 per cent.

The retail inflation seems to show no sign of decline.

The measure of consumer price inflation, the CPI index, rose 5.21 per cent in December from a year earlier, the Ministry of Statistics said on Friday.

The CPI-based retail inflation jumped to 5.21 percent in December on annual basis, as compared to 4.88 percent in the preceding month.

"The 0.3% m/m gain in core consumer prices in December will reinforce expectations of a Fed rate hike in March and supports our view that the Fed will ultimately increase interest rates by a more aggressive 100bp cumulatively this year", said Paul Ashworth, chief USA economist at Capital Economics.

The results may boost already-firm expectations for a March interest-rate increase and could help calm an increasingly heated debate among Fed officials over why inflation has stayed relatively placid despite solid economic growth and the lowest unemployment rate since 2000.

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Rising inflation amid firm global crude oil prices is a major worry for Prime Minister Narendra Modi ahead of his last full-year budget, due on February 1, as he hopes to win a second term in 2019.

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"The rise in housing inflation is likely to be persistent, while rising crude oil prices pose another risk".

In a separate report on Friday, the Commerce Department said retail sales rose 0.4 percent last month.

As per the Bloomberg survey, the median inflation estimate was 5.1% yoy. Economists were expecting to see a 0.2% rise in price pressures.

Looking at some of the components, the report said that food index increased 1.6% in 2017, while energy index increased 6.9%.

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