Inflation rate declines in December riding on strong manufacturing indices


India's central bank is likely to hike its policy rate later this year as core inflation is set to rise further, Shilan Shah, an economist at Capital Economics, said.

As per data released by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, food inflation saw a marginal decline to 4.70 percent in January from 4.96 percent in December previous year.

The Commerce Department also reported that United States retail sales declined 0.3% in January, an unexpected drop that analysts said made it more hard to draw a clear picture of the USA economy.

Treasuries slumped and investors marked up expectations for Federal Reserve interest-rate increases.

THE inflation rate unexpectedly remained steady at 3 per cent in January, keeping the pressure on the Bank of England to hike interest rates as early as May.

The long stretch of weak USA inflation may be coming to an end as consumer prices jumped 0.5% in January, adding to equity investors' jitters.

United Kingdom consumer price inflation remained at 3% in January, the same level as in December.

United Kingdom inflation had hit its highest since March 2012 in November at 3.1%.

Core CPI is projected by consensus to rise 0.2% in January following a similarly sized increase in December.

However, core inflation that excludes energy, food, alcoholic beverages and tobacco, accelerated to 2.7 percent from 2.5 percent in December, which was also above the expected 2.6 percent.

Oxford Economics lead United Kingdom economist Martin Beck said: "A fall in annual CPI inflation last December to 3% from the previous month's 3.1% was only the second month in 2017 to see a decline in the CPI rate".

On a monthly basis, the NBS said CPI in January 2018 dropped by 0.24 per cent points from the rate recorded in December (15.37 per cent).

Ben Brettell, a senior economist at Hargreaves Lansdown, said it would have marked the first step towards bringing inflation back to the Bank's 2% target. "The consumer non-durables, which are mainly fast moving consumer goods, too showed an increase of 16.5 per cent as against contraction of 0.2 per cent", it said.

Consensus anticipates a 0.3% increase in the CPI headline for January following a 0.2% rise in December.

The report said the annual food price index and food price pressure continued into December though generally at a slower pace year-on-year.

United Kingdom manufacturers increased the prices they charged by 2.8%, less than the consensus forecast of 3% and the smallest increase since November 2016. The logic goes that the trend of a rising CPI could lead the Fed to ease up on its fiscal stimulus by raising interest rates.