U.S. personal spending rose 1 percent
last month, the biggest rise since October 2001, and a gauge of
inflation matched the largest gain in almost 14 years as the
economy and job market improved.
“The underlying inflation rate has moved up significantly
over a relatively short period,” said David Greenlaw, chief U.S.
fixed income economist at Morgan Stanley in New York.
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The increase in purchases followed a 0.2 percent rise in
April and reflected more spending on automobiles and other
durable goods, the Commerce Department said in Washington. The
report’s price index rose 0.5 percent, partly because of fuel
prices, and hasn’t seen a bigger one-month jump since September
1990.
Federal Reserve policy-makers are forecast on Wednesday to
raise their target for the benchmark interest rate from the
lowest since 1958 to prevent inflation from accelerating. Higher
prices eat into income gains and purchasing power, which may
restrain the economy. At their last meeting in May, central
bankers said rate increases would be “measured.”
“The obvious risk is that there is no let-up on the
inflation front and the Fed is forced to abandon the ‘measured’
approach to tightening,” Greenlaw said.
Bloomberg News
