CPI surges 0.5% in January, but yearly rate of inflation unchanged

CPI surges 0.5% in January, but yearly rate of inflation unchanged

Output price inflation eased to 2.8 percent in January, the weakest since November 2016, from 3.3 percent a month ago.

The core CPI, which excludes food and energy, rose 1.7 percent in January from a year earlier, compared with 1.8 percent in December, according to the median projection of economists ahead of the Labor Department data.

The dollar.DXY rallied against a basket of currencies.

There are fears that inflation, which is seen as being driven by a tightening labour market and increased government spending, could force the Fed to be a bit more aggressive in raising rates this year than is now anticipated. Macroeconomic research house Capital Economics, for instance, is predicting a whopping three hikes in 2018 alone, quite the tall order considering the central bank hasn't executed that many rate rises since 2007 before the global financial crisis kicked off.

"Some of laws of normal economic nature seem to be reasserting themselves", Nathan Sheets, chief economist for PGIM Fixed Income and a former Fed and Treasury official, said on Bloomberg Television.

"Peering through the specifics and looking at the bigger picture, the key issue in our view at present is that fiscal policy is becoming more expansionary at a time when many economies are already at (or close to) full employment".

On month-on-month basis, the bureau stated the urban index rose by 0.83 per cent in January 2018, up by 0.17 from 0.66 per cent recorded in December 2017. The CPI rose 0.2 percent in December. The year-on-year increase in the CPI was unchanged at 2.1 per cent as the large price gains from last year dropped out of the calculation.

Clothing costs jumped 1.7 percent in January after three months of declines.

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

Over the same period, inflation, as measured by CPI was 2.7 per cent and was four per cent as measured by RPI.

FILE PHOTO: A woman shops at an H&M store in New York City, U.S. December 23, 2017. "Numbers are along RBI's revised projections, with the next six months to stay firm on arithmetic terms i.e due to base effects", Radhika Rao, India Economist at DBS Bank said. The CPI inflation rate for January was 0.5 percent and 2.1 percent for the year, up from 1.9 percent in from initial expectations.

This could reduce the flow of cash into the stock market and put pressure on consumer spending, with implications for corporate revenue, profit and cash flow. Capital goods sector, a proxy for investment activity in the economy, too grew 16.4% while that of consumer non-durable which gives a sense of consumption in rural areas grew 16.5%.

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