Tuesday, 23 April, 2019

Retail inflation eases to 2.05% in January

2rlishno Retail inflation eases to 2.05% in January
Priscilla Morrison | 14 February, 2019, 08:13

A fall in electricity, gas and other fuels drove the decline, the ONS said.

The rate was down from 2.1pc in December and is the first time inflation has been below the Bank's 2pc target since January 2017. This alone took 0.2 percentage points off the overall measure. In urban areas, the inflation rate was 2.91%, the same as in December.

"The recent pick-up in wage growth likely will filter through to services inflation, which ticked up to 2.5% in January, from 2.4% in December".

Meanwhile, heavy discounting from retailers saw clothing and footwear prices falling by 1.3% for the year to January, which had a small downward pull on inflation.

The MPC, which mainly monitors retail inflation data, also revised down its inflation projections for the period from April to September to 3.2 percent to 3.4 percent, from 3.8 percent to 4.2 percent. India imports almost 80 percent of oil it consumes.

January inflation missed economists' expectations and the central bank's target of 2 per cent.

The core measure is now in the process of reversing its 2018 decline to 1.8% and the Bank of England has said repeatedly it expects the index to remain biased toward the upside for some time to come.

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Prime Minister Narendra Modi, who faces tough general elections by May, has announced an annual transfer of 750 billion rupees ($11 billion) to millions of farmers, and tax benefits for the middle class, which many economists say could spur both consumer spending and inflation.

"It looks like headline inflation will begin to move towards core", HSBC's Bhandari said.

Inflation was dragged down by lower electricity, gas and petrol prices between December and January, which was partially offset by lower air fares.

At the pumps, motorists had lower fuel costs last month, with petrol down by 2.1p per litre on the month to 119.6p.

Wednesday's figures from the Office for National Statistics suggested less short-term inflation pressure in the pipeline. The central bank also changed its policy stance to "neutral" from "calibrated tightening", a shift that allows it to act either way on the key rates.

A Reuters poll after the MPC's February 7 rate cut showed a slim majority of economists see another rate cut before the election.

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