Inflation rises by more than expected after scare that rocked global markets

'Tis the Season for Inflation Scares

CPI or retail inflation, as it is better known, is an indicator of consumer prices and had shot up to a 17-month high of 5.21 per cent in December. That was the largest increase since January 2017 and followed a 0.2 percent rise in December. Excluding volatile food and energy costs, the so-called core gauge increased 0.3 percent, also above forecasts for 0.2 percent.

The RLA argues that today's figures show that calls by many in the Labour Party and elsewhere for rents to be linked to inflation would leave many tenants worse off.

"We doubt a weaker inflation print would result in much selling of the pound". Many other sectors too experienced a reduction in prices giving a relief to the customers.

The Retail Prices Index (RPI), a separate measure of inflation, edged lower to 4.0% last month from 4.1% in December.

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The fairly strong inflation report from the Labor Department on Wednesday put more pressure on US financial markets, which were spooked by a surge in annual wage growth in January.

Inflation in vegetables slowed to 26.97% as against 29.13% in December while that in fruits eased to 6.24% from 6.63% in December.

"The IIP growth in December was mainly on account of uptick in manufacturing sector which constitutes 77.63 per cent of the index", the data released by the Central Statistics Office (CSO) showed, adding that it also grew by 8.4 per cent during the month as compared to just 0.6 per cent in December 2016.

The trio at Edelweiss further said that November 2017 IIP stood at near 5-year high. BoE policymakers have pointed to rising wages as a possible reason to increase rates, although headline data still shows average growth in weekly earnings well below the rate of inflation, squeezing on living standards.

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Inflation figures for a big economic data point came out higher than anticipated Wednesday morning, causing stock futures to run in the negative before the opening bell. Inflation rose 2.1 percent from a year earlier and core prices increased 1.8 percent.

The Reserve Bank of India (RBI) last week kept interest rates unchanged and raised its March quarter CPI inflation forecast to 5.1 per cent. Auto insurance prices rose 1.3 percent, the most since 2001. The CPI rose 0.2 per cent in December. The rate was expected to fall moderately to 3 percent.

What are they saying?: "This is a classic inflation scare", said Michael Arone, chief investment strategist of State Street Global Advisors, before the CPI report was issued. "While bottom line is expected to see around 14-15% growth on YoY basis, the growth is likely to be driven by sectors such as Automobiles, Metals, Air Transport Service, Consumer Staples etc".

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