IIP quickens to 7.5%, inflation softens

CPI inflation eases to 4.44% in February 2018 food inflation at 3.26

Illustration image of Mandi market

The measure of consumer price inflation on an annual basis, the CPI index, eased to 4.44 percent in February, data released by the Ministry of Statistics showed on Monday.

Prices for all items less food and energy, the "core CPI", grew 0.2% in February, following a 0.3% January increase.

Core consumer prices, which exclude food and energy prices, also edged up by 0.2% in February following a 0.3% increase in January.

"All in, a largely as expected February inflation report that likely isn't going to move the market or Fed expectations much, but some upside lies ahead for the core inflation rate", he said.

USA consumer price index (CPI) data is due at 1230 GMT. The consumer price inflation could be below 5 percent for the next two months followed by a rebound to 5.8-5.9 percent.

The jobless rate is at a 17-year low of 4.1 percent and economists expect it to drop to 3.5 percent by year-end.

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The Consumer durables and Consumer non-durables have recorded growth of 8.0percent and 10.5% respectively.

Former Fed Chairwoman Yellen had recently expressed her concern that inflation was stalled due to the Fed hiking rates too quickly. It then grew by 7.06 per cent in December and by 3.5 per cent in January 2017. It is set to increase by just 0.2% for both headline and core, which should keep the core year over year pace unchanged at 1.8%. The next meeting of the Monetary Policy Committee is scheduled on April 4 and 5.

The brokerage house believes that most month on month decline came from food, as expected. "Although past year we faced a disconnect between the continued strengthening in the labor market and the step-down in inflation, mounting tailwinds at a time of full employment and above-trend growth tip the balance of considerations in my view", Fed Governor Lael Brainard said last week.

The central bank expects inflation to pick up to 5.1-5.6 percent in April-September and then ease later on anticipation of for normal rainfall.

"The eventual rabi harvest, distribution of the 2018 monsoon and the operationalization of the proposals made in the Union Budget for FY19, including the launch of Operation Greens and the augmentation of minimum support prices, would impact the trajectory of food inflation going forward", she added. Inflation in housing - the category that had rapidly been pushing up core inflation for the last 7-8 months - was stable at a high 8.3% for the month. Used auto and trucks prices declined after four straight monthly increases.

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