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

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Data released by the central statistics office today showed that inflation for the month of December has already exceeded the Reserve Bank of India's (RBI) medium term target. Last month, RBI had left policy rates unchanged fearing a rise in inflation.

On a year-on-year basis, the manufacturing sector expanded by 10.2 percent, whereas mining's output inched-up by 1.1 percent and the sub-index of electricity generation increased by 3.9 percent.

Analysts polled by Reuters had predicted December's retail inflation rate would climb to 5.10%, the highest since July 2016, from 4.88% in November.

Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, continued to witness a jump, with prices of food rising 4.96 percent in December from 4.42 percent in November. The Fed last year accelerated that pace, raising rates three times and signaling at its meeting last month that it expected to raise rates at the same clip this year. "If the inflation pressure continues beyond this level, one can expect the central bank to change its policy stance to hawkish", he said.

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

"Once spring comes around. the big declines in components like wireless telephone services will drop out of the annual calculation and the core inflation rate will rebound well above 2 percent", Ashworth said.

Factory output growth in October was at 2.2% while CPI was at 5.2 per cent from 4.88 per cent a month ago.

Food costs edged up 0.2 percent in December and are up a modest 1.6 percent over the past year.

The Consumer Price Index inflation for rural areas was 5.27% in December 2017, while that for urban areas was 5.09% as compared to that in December 2016.

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