Consumer price inflation rose to 5.0% in June

Irving Hamilton
July 13, 2018

Federal data show the consumer price index - an important gauge of inflation - ticked up 0.1 percent in June.

The Fed is keeping a close eye on inflation as it proceeds with several planned interest rate hikes.

The numbers mean, inflation has now stayed above the Reserve Bank of India's (RBI) 4 per cent target for an eighth straight month. The retail inflation was 4.87 per cent in May while in June previous year it was 1.46 per cent. The RBI's next policy review is on August 1. The forecasts ranged from 4.60 percent to 6.00 percent.

The rise in inflation was driven by higher fuel prices and a depreciating rupee, according to Reuters. This is higher than the final figure of 4.87% for May.

The benchmark Brent crude oil price has surged near 20 percent this year and had crossed $80 a barrel in May, the highest level since 2014. In 2018, retail prices of petrol have climbed 9.4 percent and diesel by 14.3 percent in the capital, Delhi.

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According to the PayScale Index, which tracks quarterly paychecks, inflation-adjusted wages between April and June shrank almost 1.5 percent compared with the same period past year.

Prices of vegetables grew 7.8 percent in June, as compared with 8.04 percent in April, while fruits' prices rose 10.13 percent in June from 12.33 percent a month ago.

Prime Minister Narendra Modi's decision to raise procurement prices ahead of elections, estimated to cost 150 billion rupees ($2.2 billion) to the government, could push up prices of foodgrains in coming months.

For Americans, rising prices are problematic given that wage growth remains anemic, despite promises of corporate investment fueled by last year's federal income-tax cuts.

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