January wholesale inflation quickens on fuel, manufactured products

Darnell Taylor
February 14, 2020

The last time the wholesale inflation touched 3.1 per cent was in April 2019.

Prices of airline tickets, health care, recreation, and education were significant contributors to inflation in January. Retail inflation was estimated at 7.6% in January and the recent spike has prompted the RBI to hold back further reduction in interest rates to spur economic growth.

Furthermore, the prices of fuel and power sub-category increased at a faster rate of 3.42 per cent from (-) 1.46 per cent. On inflation, she said while there had been an aberration for a couple of months, the rate of rise was within the band anticipated by the Government.

Instead, it remained at December's pace, with food prices 0.2% higher on the month and energy prices 0.7% lower.

The consumer price index (CPI)-based retail inflation rose to 7.59% in January this year.

The Fed a year ago cut its benchmark interest rate three times to the current historically low range of 1.5% to 1.75%.

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Economists surveyed by the Wall Street Journal were expecting a 0.2% monthly rise and a 2.5% yearly increase in prices during January.

The measure throughout 2019 fell short of the Fed's target of 2% inflation, a fact Fed chairman Jerome Powell acknowledged during testimony before Congressional lawmakers earlier this week.

But because they worked fewer hours, their weekly inflation-adjusted earnings showed "essentially no change" over the past year, the Labor Department said.

In his remarks, Powell also specified several "important longer-run challenges" that the US economy faces, namely relatively low labor force participation by people in their prime working years and weak productivity growth.

TIGHT LABOR MARKET Inflation is likely to be supported by a tightening labor market. January PCE price data will be published later this month. "Of the difference of 3.4 per cent, about 2.45 per cent, or 70 percentage points, comes just from onion", he said, adding a moderation in onion prices was expected after a fresh harvest in March. Apparel prices jumped 0.7% after increasing by 0.1% in December.

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