Inflation indicators that the US Federal Reserve likes to watch suddenly accelerated in January and consumer spending rose after a slump at the end of last year, reinforcing pressure on monetary policymakers to continue raising interest rates.
The personal consumption expenditures price index rose 0.6% on a monthly basis, the highest level since June, according to data released by the US Department of Commerce on Friday. The core PCE price index, which excludes food and energy prices, also jumped 0.6%.
Personal spending jumped by 1.1%, after adjusting for price changes, the highest rate of increase since March 2021, after declining at the end of last year. This increase reflects an increase in spending on goods and services, including cars, food services and accommodation.
The median estimate of economists polled by Bloomberg was 0.5% for the personal consumption expenditures price index and 0.4% for the core index. They also expected real personal spending to rise by 1.1%.
US Treasury yields rose, futures on the Standard & Poor’s 500 index extended their losses, and the dollar jumped. Swap dealers continued to bet that the Fed might raise the benchmark interest rate by 25 basis points at each of the next three meetings.
US stocks recovered with anticipation of the announcement of the personal consumption expenditures index
The personal consumption expenditures price index increased by 5.4% year-on-year in January, higher than in December. The core personal consumption expenditures price index increased by 4.7%, also at a faster rate than in December.
