CPI data due Tuesday

Weekly USD  JPYMore

Weekly USD JPYMore

A report released by the Labor Department on Tuesday showed consumer prices in the US increased in line with economist estimates in the month of February. Retail inflation, based on Consumer price index (CPI), was at 5.07 per cent in January.

The seasonal trend of rising food prices as summer approaches may prevent further easing of food inflation (3.26% in February) in the ongoing month, said Aditi Nayar, principal economist at rating company ICRA Ltd.

Excluding food and fuel prices, which can see big swings, the index also gained 0.2 per cent for the month, with noted gains in the prices for auto insurance, rent and apparel. The uptick in core prices also matched expectations. Focus now turns to United States consumer price data due later on Tuesday for the global markets to gauge inflation trends in the world's largest economy and as a guide for upcoming Federal Reserve policy.

Amongst use-based industries, sectors including capital goods (14.6 per cent), consumer durables (8 per cent) and non-durables (10.5 per cent) showed healthy expansion in January, in an indication that both investments by companies and retail demand are coming back on track. That's in line with policy makers' outlook for price gains steadily approaching their goal and officials' projection for three interest-rate hikes this year, including one anticipated at the Fed's meeting next week. A stronger than expected inflation report could be the catalyst that drives prices out of the current trading range.

The CPI inflation for rural areas was 4.37% in February while for urban areas it was 4.52%.

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This was the fear at the end of January and upon Fed Chair Powell's first congressional hearing on February 27th where he was considered outspoken and hawkish. It was at 5.07 percent in January.

In another data released by the government, the industrial production for the month of January came at 7.5 per cent, up from 7.1 per cent in December. The reduction in retail inflation has been seen due to cheaper food articles and lower cost for fuel.

Deloitte India Lead Economist Anis Chakravarty said: "Overall, the latest IIP data points towards signs of economic recovery as the negative effect of the disruptive shocks of previous year appear to be on the wane". January's increase was also revised lower from 2.9 percent. The food index was unchanged in February, while the energy index increased slightly.

At a seasonally adjusted annual rate, the price index has gained 4.2 per cent so far this year, compared to a gain of only 3.3 per cent at the same point last year.

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