Retail inflation hits 17-month high of 5.21% in December

Retail inflation hits 17-month high of 5.21% in December

However, economists say that the central bank may be forced to accelerate that pace of increases if inflation shows signs of rising too quickly given that unemployment is at a 17-year low of 4.1 per cent.

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

For December, energy prices fell 1.2 per cent after surging 3.9 per cent in November. The overall 2.1 per cent price increase was identical to the inflation gain in 2016 with both years up from tiny increases of 0.8 per cent in 2014 and 0.7 per cent in 2015.

Underlying U.S. consumer prices recorded their largest increase in 11 months in December amid strong gains in the cost of rental accommodation and healthcare, bolstering expectations that inflation will accelerate this year.

The reason behind the high retail inflation is rise in prices of food items, egg, and vegetables.

As per the CSO data, inflation for the food basket increased to 4.96 per cent in December from 4.42 per cent in the preceding month.

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Rising inflation amid firm global crude oil prices is a major worry for Prime Minister Narendra Modi ahead of his last full-year budget, due on February 1, as he hopes to win a second term in 2019.

Food inflation remained volatile with prices falling in September and firming up from October, as eggs, vegetables, sugar and fruits became relatively more expensive.

Supporting the rise in underlying inflation pressures last month, rents increased 0.4 percent.

The RBI, which has a medium-term inflation target of 4 per cent, has raised its inflation estimate to 4.3 per cent to 4.7 per cent for the six months through March.

The fuel inflation rose to 7.90% in December 2017 against 6.36% in November 2017.

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