United States inflation jumps, boosting likelihood of rate hike

Treasurys weakened Friday, pushing the two-year yield above 2%, after a larger-than-expected rise in a key consumer-price measure underlined rising inflation expectations and dampened appetite for US government paper.

US consumer prices rose in December, bolstering expectations that long-weak inflation is set to gain strength in the new year....

Needless to say-except that I guess I need to say it-what really matters is the inflation rate compared to the previous year, not the previous month.

Retail inflation touched 17-month high in December due to strengthening of food and crude oil prices, dashing hopes of interest rate cut in the near future.

The sub-category of food and beverages during the month under consideration recorded a rise of 4.85 per cent over the same period a year ago.

Consumer Price Index data will be released for December at lunch time today and inflation is expected to show a small decline. However, a more closely watched number within this gauge of retail inflation recorded its biggest gain in almost a year.

Economists surveyed by Reuters had forecast 4.4 percent growth in output compared with a downwardly revised 2.0 percent year-on-year increase in October. For all of 2017, retail sales were 4.2% higher than 2016, the biggest annual hike in three years.

The cumulative CPI inflation was lower at 3.25% in April-December FY2018 compared with 4.85% in April-December FY2017. But some analysts feel inflation could overshoot its estimates.

Fed officials in December penciled in three additional quarter-percentage-point increases in their benchmark federal-funds rate for 2018, and private-sector forecasters think their next rate increase will likely come in March.

The Reserve Bank of India (RBI) maintained a neutral stance in its December monetary policy review, citing the risk of rising inflation.

The economists, however, have predicted no change in rates of RBI.

The inflation for housing increased to 8.25%, while that for miscellaneous items moved up to 3.79% in December 2017. There's a sharper drop in food inflation than what I was anticipating.

Fuel and light inflation rose by 7.90 per cent in December.

Vanessa Coleman