inflation retreats on soft consumer spending
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[April 29, 2016]
WASHINGTON, April 29 (Reuters) - -
U.S. inflation barely rose in March as consumer spending remained tepid,
making it less likely that the Federal Reserve will be able to hike
interest rates twice this year.
The Commerce Department said on Friday the personal consumption
expenditures (PCE) price index, excluding the volatile food and
energy components, edged up 0.1 percent last month after an upwardly
revised 0.2 percent increase in February.
Last month's gain in the so-called PCE was in line with economists'
expectations. In the 12 months through March the core PCE rose 1.6
percent after advancing 1.7 percent in February.
The core PCE is the Fed's preferred inflation measure and is running
below the U.S. central bank's 2 percent target. The Fed said on
Wednesday its policy-setting committee was continuing to "closely"
The Fed left its benchmark overnight interest rate unchanged and
suggested it was in no hurry to tighten monetary policy further. It
hiked rates in December for the first time in nearly a decade.
Fed officials earlier this year forecast two more rate hikes for
2016. But market-based measures of Fed policy expectations are
mostly leaning toward one rate increase this year.
Inflation is being restrained by a strong dollar and cheaper energy.
A tightening labor market also has failed to generate strong wage
gains, contributing to moderate consumption growth.
In March, consumer spending ticked up 0.1 percent after an upwardly
revised 0.2 percent gain in February. Consumer spending, which
accounts for more than two-thirds of U.S. economic activity, was
previously reported to have risen 0.1 percent in February.
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When adjusted for inflation, consumer spending was unchanged after
increasing 0.3 percent in February. The consumer spending figures
were included in the first-quarter gross domestic product report
published on Thursday. The economy grew at a 0.5 percent annual rate
in the January-March period, a sharp slowdown from the fourth
quarter's 1.4 percent pace.
Consumer spending is expected to regain momentum as wages steadily
increase. Personal income rose 0.4 percent in March after nudging up
0.1 percent in February. Savings jumped to $735.5 billion last
month, the highest level since December 2012, from $696.4 billion in
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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