Economy

Inflation remains tame in February

Inflation remains tame in February”

Retail inflation rose to a four-month high of 2.57 per cent in February but the prospects for a rate cut has brightened as the number is still below the RBI's inflation target of 4 per cent, while industrial growth declined to below 2 per cent in January.

The low level of inflation also gives the Federal Reserve more flexibility in holding off on further increases to a key short-term interest rate, enabling the USA central bank to provide support for economic growth.

"The strong CPI reading from January means that another strong reading in February presents risk to the now-consensus view (which we share) that inflation will stay subdued".

According to the Central Statistics Office data, the CFPI had deflated by (-) 2.24 per cent in January 2019.

Economists expected a 1.6% increase in overall prices from a year earlier, and a 2.2% rise in core prices over the 12-month period.

Excluding the volatile food and energy categories, so-called core prices rose 0.1%, compared with a 0.2% rise in January.

Despite the low numbers consumers faced higher costs last month for housing, food, and gasoline. Prices of cereal and products went up at 1.32 per cent.

Core inflation numbers, however, remain sticky at above 5 per cent and prices for most services are rising at above 6 per cent, reflecting pickup in demand conditions and pricing power, particularly in urban economy, she said. The CPI increased 1.6% on a year-on-year basis in January.

Monthly inflation was 0.2 percent compared last month to January after being flat for three months, matching economists' expectations. "We expect the inflation trend to remain firm near 2%".

The public's inflation expectations fell in February, according to the Federal Reserve Bank of New York's latest Survey of Consumer Expectations. The central bank also changed its policy stance to "neutral" from "calibrated tightening". It hit the USA central bank's 2 percent inflation target in March previous year for the first time since April 2012. The core CPI had increased by 0.2% for five straight months. Prices fell for new (-0.2 m/m%) and used (-0.7% m/m) vehicles, prescription drugs (-1.0% m/m), and recreation (-0.4% m/m).

In contrast, output of consumer non-durables rose by 3.8 per cent and that of consumer durables by 1.8 per cent.



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