CPI Inflation at 5.21%, hits 17 months high in December 2017

13 Enero, 2018, 05:05 | Author: Arnold Perez
  • The Nikkei India manufacturing Purchasing Managers’ Index rose at the fastest rate in five years in December to 54.7 from 52.6 in the previous month

Shoppers look over shoes on sale at a Macy's store in New York, NY, U.S. on November 23, 2012.

Investors' already-firm expectations rose for a Fed interest-rate increase in March, as the data could help calm an increasingly heated debate among central bank officials over why inflation has stayed relatively placid despite solid economic growth and the lowest jobless rate since 2000.

A modest rise in consumer prices in December and solid growth in retail sales bolstered expectations that inflation is firming after a long run of softness and that US economic growth ended 2017 on a robust note.

The Consumer food price index (CFPI) in December stood at 4.96 per cent compared to 4.42 per cent in November 2017.

Most of the pressure here in December's inflation was tied to housing and medical costs.

"And, with inflation expected to continue to taper up all the way until the middle of the year, we do not expect any kind of changes in the policy rate until the end of the year", says Tirthankar Patnaik, India Strategist at Mizuho Bank.

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The yield for the 10-year benchmark note climbed to 2.583%, from 2.531%, while the 30-year bond yield was higher at 2.894%, versus 2.863%. USA stock index futures pared gains. Meanwhile, the IIP growth for October 2017 has been revised downwards to 2% from the provisional estimates of 2.2 released last month.

Last month, the price of services fell 0.2 percent after rising for nine straight months. It increased borrowing costs three times in 2017. The energy index rose 6.9% in the last twelve months. The cost of motor vehicle insurance increased 0.6 per cent. Economists were expecting to see a 0.2% rise in price pressures.

After maintaining a benchmark policy rate at a record low near zero for seven years, the Fed started gradually raising rates modestly - once in December 2015 and again in December 2016.

Retail inflation touched 17-month high in December due to strengthening of food and crude oil prices, dashing hopes of interest rate cut in the near future. The nationwide average for gas is $2.52, up from $2.35 a year ago, according to AAA. Food away from home grew 0.2%. Sales at auto dealerships rose 0.2 percent.

Earlier this month, Finance Minister Arun Jaitley had told Parliament that inflation had increased owing to a seasonal rise in vegetable prices and the higher house rent allowances disbursed to government employees under the 7th Pay Commission recommendations. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. The Commerce Department previously said they had increased 0.8 per cent in November.

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