December CPI inflation over 5.2%, dashing hopes of RBI rate cut

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The December gain was the smallest advance since October. The higher healthcare costs led economists to expect the core PCE price index probably rose 0.2 percent in December after nudging up 0.1 percent in November. "The "transitory" softness in the core is over, " wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Consumer non-durables shot up 23.1 percent in December as compared with a growth of 3.3 percent a year ago.

The Commerce Department reported Friday that retail sales in the U.S rose 0.4% in December from the month before, meeting a consensus estimate from analysts, and following an upwardly revised November surge of 0.9%.

Amazon (AMZN.O) rose 1.89 percent to breach $1,300 for the first time, while Home Depot (HD.N) rose 1 percent and Walmart (WMT.N) 0.6 percent.

"The uptrend seen in food inflation in recent months appears to have sustained in December", said Abhishek Upadhyay, economist at ICICI Securities PD. Within the food items, the inflation increased for vegetables to 2.57%, meat and fish 4.22%, fruits 9.48% and oils and fats 4.37%.

The chart above shows that the US Dollar Index had a relatively mute reaction to the CPI and retail data. Finally, St. Louis Fed President, James Bullard, chimed in by acknowledging that the Fed's inflation target has sparked some debate in the policies undertaken at the Central Bank.

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Prices for U.S. Treasuries fell, with the yield on the interest-rate sensitive two-year note rising to its highest since September 2008.

RBI held its policy rate steady at 6.0% last month and said all possibilities were on the table, depending on how price pressures and growth panned out.

One of those one-off factors that has been holding down annual price growth: a drop last spring in prices for cellphone plans. This 12-month change has floated between 1.7 % and 1.8 % for eight consecutive months. However, a more closely watched number within this gauge of retail inflation recorded its biggest gain in almost a year.

Consumer spending accounts for more than two-thirds of the US economy and it increased at a 2.2 per cent annualized rate in the third quarter, when the economy grew 3.2 per cent. "Terming this as industrial recovery will be too early". He is awaiting Senate confirmation.

The Consumer Price Index CPI measures the cha nge in prices paid by consumers for goods and services.

The energy index in the United States last month fell 1.2% compared to November.

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