Inflation at 17-month high, rises to 5.21 pc in Dec, 2017

Ivan Schwartz
January 13, 2018

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The strengthening domestic demand was also underscored by other data on Friday showing retail sales increasing at a solid clip in December.

Many analysts expect RBI to keep interest rate unchanged this year due to rising inflation.

The US central bank has scheduled three rate rises this year and these latest figures have seen the pound reach its highest level against the dollar since the European Union referendum. The inflation has now picked up for three consecutive months as it stood at 3.58 per cent in October and 4.88 per cent in November.

Food costs edged up 0.2 percent in December and have increased a modest 1.6 percent over the past year. Vegetable prices rose the most in December - by 29.13%.

After coming in below the Fed's target for years, USA inflation appears to have rebounded in the US. The central bank's preferred inflation measure, the personal consumption expenditures price index excluding food and energy, has missed its target since May 2012.

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The dollar fell to a session low against a basket of currencies after the data. Prices for US Treasuries fell, with the yield on the interest-rate sensitive two-year note rising to the highest since 2008. US crude futures settled up 0.8 percent at $64.30 a barrel, not far below $64.77 set on Thursday, which was the highest level since late 2014. It increased borrowing costs three times in 2017.

While vegetable prices likely dropped moderately last month, a pay revision in July a year ago for government employees probably pushed up demand and inflation. The cost of motor vehicle insurance increased 0.6 percent. Including all items, the broader CPI showed a smaller gain in December in line with estimates, as energy prices declined, a Labor Department report showed Friday. The unemployment rate is at its lowest level in 17 years, meaning companies should in theory be competing more aggressively for workers.

A key gauge of underlying producer price pressures that excludes food, energy and trade services edged up 0.1 percent last month. Owners' equivalent rent of primary residence climbed 0.3% after gaining 0.2% in November. Sales at auto dealerships rose 0.2 per cent.

USA consumer prices rose in December, bolstering expectations that long-weak inflation is set to gain strength in the new year....

For the full year, CPI rose 2.1 percent, the same as 2016, while core CPI slowed, posting a 1.8 percent increase after the 2.2 gain in the previous year.

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