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Retail inflation eases marginally to 5.07% in January

Retail inflation eases marginally to 5.07% in January

Inflation in January rose by more than economists had forecast, a report from the Bureau of Labor Statistics showed on Wednesday.

Over the last 12 months, the US consumer price index has been usually at 1.7%.

The dollar.DXY rallied against a basket of currencies.

This prompted markets to price in as much as a 70% chance of a quarter-point rise in interest rates by May.

That would slow economic growth.

The RBI said its decision to keep its repo rate, or short-term lending rate for commercial banks, unchanged is consistent with the neutral stance of the central bank aimed at achieving its median inflation target of 4 per cent.

"The Fed's job now is to prevent the economy from overheating", said Gus Faucher, chief economist at PNC Financial in Pittsburgh.

The U.S. consumer price index has been mostly at 1.7 percent over the last 12 months.

The largest downward contribution to change in the rate came from prices for motor fuels, which rose by less than what it was a year ago.

Excluding the volatile food and energy components, the CPI shot up 0.3 percent. The CPI rose 0.2 per cent in December.

Against a broadly stronger euro, sterling weakened 0.2 percent to 89.04 pence.

With the CPI data of U.S. being announced this week, this is an important inflation measurement.

Clothing prices helped to prop up the inflation figure despite having fallen 3.7% month on month, which marked a weaker drop compared to the 4.3% fall during the same period a year earlier.

FILE PHOTO: A woman shops at an H&M store in New York City, U.S. December 23, 2017.

"Markets seem primed for inflation risk right now, and so because of that there may be a bigger response" to the monthly reading, said Sam Coffin, an economist at UBS Securities LLC.

Certain sectors that saw a robust pickup in December may settle back in January, including medical goods and cars, according to Bloomberg Economics. Price pressures are also seen being fanned by fiscal stimulus in the form of a $1.5 trillion United States tax cut package and increased government spending. Capital goods output grew by 16.4 per cent in December against a contraction of 6.2 per cent a year ago.

'Factory goods price inflation continued to slow, with food prices falling in January.

Similarly, indicating a revival in consumer demand, consumer durables grew 0.9 per cent compared to a decline of 5 per cent in December 2016.

Month-on-month, output prices edged up 0.1 percent and input prices climbed 0.7 percent.

Another cause of worry flagged by the RBI was the global crude oil prices, which have firmed up sharply since August 2017, driven by both demand and supply side factors. The increases were led by much higher clothing costs and more expensive auto insurance.

Every month, 10,534 informants spread across the country provide price data for the computation of the CPI and the market items now comprise of 740 goods and services regularly priced.

"We will be looking for an increase when the ONS reports next week".

There could be another sell-off moment in markets as early as Wednesday if consumer prices in the US grow at a faster pace than anticipated, a trader told CNBC on Monday.

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