December CPI inflation over 5.2%, dashing hopes of RBI rate cut

Industry figures out Nov factory production jumps to 8.4% a 25-month high

Industry figures out Nov factory production jumps to 8.4% a 25-month high

Supporting the rise in underlying inflation pressures last month, rents increased 0.4 per cent. Owners' equivalent rent of primary residence climbed 0.3 per cent after gaining 0.2 per cent in November.

Simultaneously, the ministry also put out the Consumer Price Index (CPI) inflation number, which continued to be elevated at 5.2% in December compared to the 4.88% in November. "However, the subdued performance of electricity generation and the output of Coal India Limited may weigh upon the growth of mining and electricity in December 2017", added Nayar while giving an outlook going forward.

The rise in core inflation grabbed attention in financial markets, where investors have been sending bond yields up in recent days out of concern that rising inflation may prompt the Federal Reserve to accelerate the pace of its interest rate hikes.

India's consumer price index (CPI) or retail inflation stood at 5.21% in the month of December 2017 - higher from 4.88% in November 2017 and 3.41% in the similar month of previous year.

"Consumer price inflation has moved up on expected lines and is likely to inch up in the coming months", consulting multinational Deloitte's Senior Economist Richa Gupta said in a statement. The so-called core PPI increased 0.4 percent in November.

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RBI has a mandate to control retail inflation in the country in the range of 4% to 6%.

The dollar briefly trimmed losses against a basket of currencies after the CPI data, but later slumped to a four-month low.

For the six months through March, the RBI slightly raised its inflation projection - already above its 4 per cent medium-term target - to 4.3-4.7 per cent. It increased 1.8 per cent in the year to December.

Prices of medical care rose 0.3 percent, as the index for prescription drugs advanced 1 percent. Fed policymakers have pencilled in three rate hikes in 2018 following three previous year.

Separately, the Commerce Department said retail sales rose 0.4 per cent last month.

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But apparel prices fell for the fourth consecutive month, and airline fares fell 0.5 percent after a 2.4 percent drop in November.

Sales last month were supported by a 1.2 percent jump in receipts at gardening and building material stores.

Analysts note the upward revisions to November and October core sales make the report stronger than it initially appears, boosting economic growth estimates.

Similarly, consumer non-durables' output rose by 23.1 per cent, and that of consumer durables by 2.5 per cent.

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