Surprise increase in core inflation - ING

Cornelia Mascio
Августа 13, 2019

The number is well below the Reserve Bank of India's (RBI's) target of 4 per cent. Inflation based consumer price index stood at 3.05 per cent in May 2019 and 4.17 per cent in July a year ago.

James Knightley, chief global economist at ING, notes that the USA headline and core consumer price inflation both rose 0.3%MoM in July, which was enough to push the annual rates of inflation up to 1.8% and 2.2% respectively.

The core consumer price index, which excludes food and energy, rose 0.3% from the prior month, and 2.2% from a year earlier, according to a Labor Department report Tuesday.

Consumer inflation eased to 3.15 per cent in July from 3.18 per cent in the previous month, government data showed on Tuesday. The Reserve Bank of India (RBI) mainly factors in the retail inflation while deciding the bi-monthly monetary policy.

The retail inflation based on Consumer Price Index (CPI) was 3.18% in June and 4.17% in July 2018.

Tariffs on a wide range of consumer products imported from China, set to take effect September 1, may boost inflation further. In addition, declining yields on 10-year Treasuries have effectively wiped out any inflation-adjusted return on the security. President Donald Trump has repeatedly cited low inflation in his attacks on the Fed and calls for deeper interest-rate cuts.

The 2.2% annual gain in the core CPI followed 2.1% in June and marked the fastest increase since January. Shelter costs, which make up about a third of total CPI, rose 0.3% for a second month, while medical care was up 0.5%, apparel advanced 0.4% and used cars and trucks rose 0.9%.

Prices for new vehicles fell 0.2%, the first decline since February. Higher inflation tends to eat into wage gains. Economists surveyed by Bloomberg had forecast the core gauge would rise 0.2% from the prior month and 2.1% from a year earlier, with the broader index rising 0.3% on the month and accelerating to 1.7% on a yearly basis.

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