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India's Inflation Accelerates In December

India's Inflation Accelerates In December

Moreover, stronger inflation numbers should give the Federal Reserve confidence to raise interest rates this year at a steady clip, which can also be bearish for bonds.

However the news of high IIP growth was dampened by high retail inflation as measured by the Consumer Price Index (CPI) going above 5% mark.

The December core CPI reading was also stronger than the 0.2 percent rise forecast among analysts polled by Reuters.

The December inflation data is due to be released on Friday, January 12 at 1200 GMT.

After coming in below the Fed's target for years, United States inflation appears to have rebounded in the US.

Looking at some of the components, the report said that food index increased 1.6% in 2017, while energy index increased 6.9%.

The dollar fell to a session low against a basket of currencies after the data. Prices for U.S. Treasuries fell, with the yield on the interest-rate sensitive two-year note rising to its highest since 2008. The cost of medical care increased 0.3%, with prices for prescription medication surging 1% after rising 0.6% in November. The cost of both hospital and doctor visits increased 0.3 percent.

"The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth", an RBI statement said. The cost of motor vehicle insurance increased 0.6 percent.

Apparel prices, however, fell 0.5 per cent. 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.

After maintaining a benchmark policy rate at a record low near zero for seven years, the Fed started gradually raising rates modestly - once in December 2015 and again in December 2016. But a closely watched gauge called core inflation - which excludes the volatile categories of food and energy - surged 0.3 percent, the most in 11 months. It revised November data to show a gain of 0.9 per cent instead of the previously reported 0.8 per cent increase.

The output of primary goods grew by 3.2 per cent, while that of intermediate goods rose by 5.5 per cent. The cost of healthcare services increased 0.2 percent last month after being unchanged in November. Sales at auto dealerships rose 0.2 percent.

The five-year breakeven rate meanwhile held to most of its initial gains at 1.93 percent, which was near its highest level since April. The so-called core PPI increased 0.4 percent in November.

Strong growth in manufacturing helped push up industrial growth in November.

Similarly, consumer non-durables' output rose by 23.1 per cent, and that of consumer durables by 2.5 per cent. The economy grew at a 3.2 percent pace during that period.

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