Consumer Prices Post Biggest Rise in Nearly Four Years

Consumer Prices Post Biggest Rise in Nearly Four Years

The government attributed almost half the increase to a 7.8 percent rise in gasoline prices. This was the sharpest year-on-year rise in factory gate prices since January 2012. Meanwhile, the persistent stickiness in core inflation is contrary to the refrain that demonetisation had materially dented core demand.

"Continuous increase in prices of petrol and high speed diesel due to rise in global crude oil prices have to be taken care of by the policymakers since it may have an impact on import bills and subsequent impact on exchange rates", industry body Assocham said. "Despite the tumbling pound acting as a shock absorber for the economy in the wake of the Brexit vote, and strong industrial output and export figures, the MPC may hold fast until after Article 50 is triggered and business intentions are known". Excluding foods and fuels, there was no measured change in export prices.

But with the dollar strengthening further against the currencies of the United States' main trading partners and wage growth still sluggish, the spill-over to consumer inflation from rising commodity prices is likely to be limited. Moreover, much of the short-term increase in prices can be attributed directly to rising energy costs, which are infamously volatile.

The fact that Carney was cautious on the chances of inflation rising indicates that he doesn't see an imminent need for rates to rise from here.

Food prices added 2.7 percent year on year in January, higher than the 2.4 percent gain in December because of the holiday effect, Sheng said. It was the largest monthly increase in over a year. If the CPI data meets analysts' expectations at 2.4% in January, that will improve sentiment for that likelihood.

While the rate of price rise in sugar was 22.83 per cent, for fibres, it was 15.18 per cent, and 25.44 per cent for minerals.

Kathleen Brooks, research director at City Index told What Investment that one of the factors which dampened inflation in recent months has been the continious pattern of discounting by retail companies, such as Kingfisher and Tesco. This follows declines in 2015 and earlier in 2016.

The rise was driven by a 3.4% rise in pump prices last month.

Historically, India has paid more attention to wholesale prices than consumer ones, but the RBI now tracks retail inflation for setting its interest rates.

Combined, CPI rose by 1% over the month.