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

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

Retail inflation in India rose to 5.21% in December 2017 compared to that in December 2016, data released by the Ministry of Statistics and Programme Implementation showed on Friday.

After maintaining a benchmark policy rate at a record low near zero for seven years, the Fed started gradually raising rates in December 2015 with one quarter-point hike, and another in 2016.

The retail inflation in the country has touched a new high of the last 17 months as Consumer Price Index (CPI) crossed the 5 per cent mark to settle at 5.21 per cent for the month of December 2017, which was 4.88 per cent a month ago.

India's retail inflation hit a fresh high, growing 5.2 percent in December, mainly due to hardening housing, fuel and food prices, while inching towards RBI's upper tolerance level of inflation at 6 percent.

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.

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The RBI, which has a medium-term inflation target of 4 percent, has raised its inflation estimate to 4.3 percent to 4.7 percent for the six months through March. But some analysts feel inflation could overshoot its estimates.

"We expect the MPC to see through the jump in housing inflation in December 2017 in the upcoming policy review, which would be presented shortly after the Union Budget", she added.

Sunil Sinha, principal economist at India Ratings, said RBI was unlikely to change its policy stance soon.

The U.S. central bank is forecasting three rate hikes for 2018. 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.

Despite a cut in taxes, retail petrol prices have risen 5.6 per cent and diesel by 9 per cent since June in Delhi.

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