Published: Wed, June 13, 2018
Markets | By Otis Pena

U.K. Inflation Stays Put as Fuel Prices Rise Most Since 2011

Retail inflation jumped to 4-month high of 4.87 per cent in May on costlier food items such as fruits, vegetables and cereals coupled with high fuel rates.

Shoppers browse in an Aldi store in London, Britain, February 15, 2018.

Retail inflation was highest in West Bengal, at 8.18%, and the lowest in Delhi, at 2.47%, the data showed.

Consumer-price growth stayed at 2.4 percent in May, as forecast by both the Bank of England and economists surveyed by Bloomberg.

Analysts at German brokerage Deutsche Bank also said they expect a 0.25 per cent rate hike by the RBI at the August review, saying an inflation targeting central bank will feel the need to tighten the policy based on these "signals" from inflation.

Central banks in many emerging markets are raising rates to stem capital outflows, battle inflation and support domestic currencies following a resurgence in the dollar on higher US interest rates.

For the fuel and light category, the inflation last month stood at 5.8 per cent, up from 5.24 per cent.

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Other recent data, pointing to only a slow recovery in the economy after a weak start to 2018, have also suggested the BoE is unlikely to see an urgent need to raise rates.

"It's just not screaming "hike, hike, hike" now", Clarke said.

"The UK (is) close to the bottom of the G7 growth league and close to the top of the inflation league".

The Bank of England cited a slowdown in United Kingdom growth in the first quarter of the year for its decision not to raise Bank rate in May.

The Indian economy grew 7.7% year-on-year in January-March, its quickest pace in almost two years driven by higher growth in manufacturing, the farm sector and construction, data showed last month. Clarke said markets priced in only a 50 percent chance of an August rise.

Hopes that motorists might get some relief this month were called into question Wednesday by the RAC motoring organization, which said prices have continued to rise since the end of May despite a fall in wholesale costs.

However, the fuel price rise was offset by a drop in the cost of computer games and smaller rises in energy bills than a year earlier. It took the annual growth rate to 9.2 percent.

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