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Published: Sat, January 13, 2018
Economy | By Melissa Porter

CPI Inflation at 5.21%, hits 17 months high in December 2017

CPI Inflation at 5.21%, hits 17 months high in December 2017

Analysts polled by Reuters had predicted December's consumer inflation rate would climb to 5.10%, the highest since July 2016, from 4.88% in November.

The Labour Department said its Consumer Price Index excluding the volatile food and energy components rose 0.3 per cent last month also as prices for new motor vehicles, used cars and trucks and motor vehicle insurance increased. Keep in mind that the Federal Reserve wants inflation in a 2.0% to 2.5% range on the annualized level, and higher inflation is also expected to justify further interest rate hikes ahead as the Fed moves back toward a normalized interest rate policy.

Weak import and producer price data this week had raised concerns about the inflation outlook, although the two reports do not have a strong correlation with the CPI.

But some economists think the Fed might be forced to accelerate the pace if signs emerge that inflation is picking up, given that unemployment is hovering at a 17-year low.

A closely-watched measure known as "core" sales - which excludes autos - increased 0.4 percent in the month, and posted a gain of 4.3 for the full year, which was the biggest increase since 2011.

The slight rise in the CPI in December was driven mainly by higher shelter and food costs, which rose 0.4 percent and 0.2 percent, respectively.

Earlier this month, Finance Minister Arun Jaitley had told Parliament that inflation had increased owing to a seasonal rise in vegetable prices and the higher house rent allowances disbursed to government employees under the 7th Pay Commission recommendations.

The energy index last month fell 1.2 percent compared to November.

After coming in below the Fed's target for years, USA inflation appears to have rebounded in the US.

The US central bank has scheduled three rate rises this year and these latest figures have seen the pound reach its highest level against the dollar since the European Union referendum.

The broadest gauge of inflation showed a slowdown in December, rising 2.1% compared to 2016, as expected, which was slightly down from November's 2.2% result, said data from the Bureau of Labour Statistics on Friday. The government figures show that gas prices have risen 6.9 percent from December 2016.

Sales last month were supported by a 1.2 percent jump in receipts at gardening and building material stores. Manufacturing grew 10.2 per cent against 2.5 per cent in October.

He said the biggest positive was the revision to the November retail data, which suggests that fourth-quarter economic growth may have been stronger than previously thought.

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