As per the data released by the Central Statistics Office (CSO), inflation for the food basket increased to 4.96 per cent in December from 4.42 per cent in the preceding month. Last month, RBI's Monetary Policy Committee (MPC) had forecasted that retail inflation will hover around the range 4.3 to 4.7 per cent in quarter ended December and March, higher than the previous projection of 4.2-4.6 percent.
Consumer inflation slowed in December to a tiny 0.1 percent gain as the cost of energy products tumbled following a big jump in November.
The December increase in consumer prices followed a sharper 0.4 percent increase in November, the Labor Department reported Friday. In the same period of 2016, the rate was 3.41 percent. "If the inflation pressure continues beyond this level, one can expect the central bank to change its policy stance to hawkish", he said. The Fed last year accelerated that pace, raising rates three times and signaling at its meeting last month that it expected to raise rates at the same clip this year.
The retail inflation seems to show no sign of decline. The government figures show that gas prices are up 6.9 percent from December 2016.
The jump in retail inflation comes a month after the Reserve Bank warning that there may be a spike in prices in the coming months.
Rising food prices pushed India's retail inflation to a 17-month high in December, breaching the central bank's medium-term target for the second straight month, which could intensify pressure for it to raise policy rates in the next few months. Clothing costs have fallen the past four months are down 1.6 percent over the past year.