Tuesday, 20 November, 2018

United States inflation in March hits Fed goal

US consumer spending rebounded 0.4 percent in March, while annual inflation up 1.9 percent Global Data Flows In The Headlines On Monday
Elsie Buchanan | 01 May, 2018, 05:01

The U.S. central bank has been trying for years to lift subpar inflation - seen as a sign of anemic economic activity - to the central bank's long-run objective of 2%.

Annual inflation readings in March of a year ago were held down by large declines in the price of cell phone service plans.

The core PCE price index increased by 1.9% in the year to March, a significant increase from the previous month's 1.6% gain and is the fastest inflation rate since February 2017. That was the biggest gain since February 2017 and followed a 1.7 per cent rise in February. Economic growth remains solid, and most inflation gauges show annual price increases finally moving close to the Fed's 2 percent target level. The so-called core PCE price index rose 0.2 month-on-month in March after a similar gain in February. That's why, along with expectations that underlying inflation may ease back a bit in coming months, the Fed is likely to react to Monday's news with restraint.

Inflation is now above the median of Fed officials' projections from their March meeting, which saw it at 1.9% by the end of this year. Other Fed officials argue that such a move would run the risk of allowing inflation pressures to get out of hand and force the central bank to slam on the brakes by raising interest rates so quickly that it could push the country into a recession.

"We think it's good news, but let's not declare victory yet", is how Ethan Harris, head of global economics research at Bank of America Merrill Lynch in NY, predicted Fed officials will react to the numbers.

The Fed raised rates last month and forecast at least two more rate hikes for this year.

Trump weighs decision on nuclear deal after Netanyahu's claims that Iran lied
And the files also show that Iran's intent was to revive the nuclear weapons program at a later date, he said. He said Israel recently uncovered 55,000 documents and 183 CDs from Iran's "nuclear archives".


Inflation is rising thanks to a tightening labor market and an increase in consumer spending. The economy slowed to growth of 2.3 percent in the first quarter, reflecting a slowing in consumer spending.

Meanwhile, the USA personal income and spending rose 0.3 per cent and 0.4 per cent respectively in March, the same filing said. The data was included in last Friday's advance Q1 gross domestic product report.

Americans boosted their spending by 0.4 percent in March, the best showing in three months.

When adjusted for inflation, consumer spending increased 0.4 per cent in March. Personal income rose 0.3 per cent in March after increasing by the same margin in February.

The 0.4 percent rise in spending reflected a 0.8 percent surge in spending on durable goods after two months of declines in this category which includes big-ticket items such as autos.

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