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United Kingdom inflation rate drops in December

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The RBI may also increase the rates if crude prices firm up further or there is a sharp rupee fall or if global monetary policy changes DBS Bank says

It said the percentage change in the average composite CPI for the twelve month period ending in December 2017 over the average of the CPI for the previous twelve month period was 16.50 percent, showing 0.26 percent point lower from 16.76 percent recorded in November 2017.

"The year-on-year inflation rate for the month of December 2017 as measured by the all items CPI stood at 3.46 percent, gaining 0.49 percentage points on the November 2017 rate of 2.97 percent", said the Zimbabwe National Statistics Agency (Zimstat).

Commenting on the ONS figures Paul Hollingsworth, senior United Kingdom economist at Capital Economics, said: "The fall-back in CPI inflation from 3.1% in November to 3% in December marks the beginning of what we expect will be a sustained downward trend over the course of this year". Analysts polled by Reuters had predicted the same rise for December.

She said: "A rise in oil prices together with the lagged effect of sterling's earlier falls, which is expected to take some time before being fully passed on to consumers, will continue to provide upward pressure on prices". On a sequential basis, the expenses on primary articles, which constitute 22.62 per cent of the WPI's total weightage, edged higher by 3.86 per cent, from an increase of 5.28 per cent in November.

The acceleration in factory output was mainly on account of a robust performance by the manufacturing sector.

Commenting on today's inflation figures, Yael Selfin, Chief Economist at KPMG says:"Following a relatively strong rise in November, consumer prices tapered off a little in December, taking inflation down to 3.0% and providing households with a small relief". Output of "infrastructure or construction goods" increased by 13.5 per cent and that of capital goods by 9.4 per cent.

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Aditi Nayar, principal economist at ICRA Ltd, said the divergence in the sequential trend in the CPI and WPI inflation in December was driven by food inflation, and the impact of the higher housing inflation, which was limited to CPI.

Reacting to the data, industry body CII said that November IIP numbers reflected "the economic revival taking place across sectors". ONS said in it's statement. However, policy maker Silvana Tenreyro gave an optimistic view in a speech on Monday, saying it should pick up in the medium term, which could change the interest-rate outlook.

This may help consumer spending rebound over the coming months and help to shore up United Kingdom growth.

The WPI inflation was 3.93 per cent in November 2017 and 2.10 per cent in December 2016.

The slight decline, the first drop since June 2017, was in line with expectations and partly a result of a weaker increase in air fares compared to the same month in 2016.

"Inflation's been a hot topic since the Brexit vote caused a sharp drop in sterling 18 months ago", he said. It noted the pressure was consistent at a slower pace, month-on-month; and at a slower pace year-on-year. Bloomberg Economics sees modest labour market weakness keeping rates on hold in 2018, but the next move will be a hike.

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