India Inflation Surges To 6.52%, Crosses RBI's Target Range

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India's consumer price inflation accelerated for the first time in four months in January and cut across the Reserve Bank's target corridor amid rising prices for fuel and clothing among others, according to data released by the statistics ministry on Monday.

The consumer price index, or CPI, climbed 6.52 percent year-over-year in January, faster than the 5.72 percent gain in December. Economists had forecast 5.90 percent inflation.

The acceleration in January came after inflation remained within the Reserve Bank's tolerance band of 2 to 6 percent in the previous months.

Last week, the Monetary Policy Committee of the Reserve Bank of India decided to raise the policy repo rate by 25 bps to 6.50 percent at its February meeting.

However, the central bank softened the current tightening as inflation returned to target range in December.

The unexpectedly large jump in headline consumer price inflation in January is a clear challenge to the view that the hiking cycle is at an end, Capital Economics economist Shilan Shah said.

Further signs of the economy coming off the boil and a drop in household inflation expectations means a pause cannot be ruled out yet, but a similarly high headline inflation number in February would probably seal the deal on another rate rise in the MPC's next meeting in April, the economist added.

The upward trend at the start of the year was largely due to a price hike in a broad number of categories, especially in the fuel and light segments, and clothing and footwear items.

Fuel and light costs were 10.84 percent more expensive compared to last year. This was closely followed by a 9.08 percent surge in clothing and footwear prices.

Prices of food and beverages grew 6.19 percent annually in January, and a 6.21 percent spike was seen in the costs for miscellaneous consumer goods.

Month-on-month, consumer prices moved up 0.46 percent, and the consumer food price index rose 0.34 percent in January.

India's wholesale price inflation for the month of January is set to be released on February 14.

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