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Figures: Inflation rose in May as consumer spending continued to show some strength, the government announced on Friday. The PCE index, the Federal Reserve's favorite inflation gauge, rose 0.2%, as did the base rate that excludes food and energy. The inflation rate over the last 12 months has risen to 2.3%, the fastest pace since March 2012. The core inflation rate has reached 2%, the objective long-term Fed for the first time since April 2012.
0.2% in May after gaining 0.5% in April. Economists surveyed by MarketWatch had predicted a 0.6% increase.
Personal income rose 0.4% after gaining 0.2% in the previous month.
What Happened: Consumer spending was held down in May by weak auto sales, but was strong in the second quarter, thanks to the recent redesign of the tax code. Personal disposable income rose 0.4%, the largest gain since January. The savings rate increased slightly from 3% to 3.2%.
Large Image: Economists were waiting for inflation to reach the 2% target of the Fed, but not before the end of the year. summer. Fed Chairman Jerome Powell hailed the rise in inflation at his last press conference and said that inflation could exceed the 2% target over the next few months because of rising oil prices.
The Fed is accelerating the rate of interest rate hikes – it is currently recording four rises this year, up from three in March. If inflation consistently exceeds the target, the central bank may have to accelerate the pace of increases. But, for now, Fed officials see inflation staying around 2%.
Market reaction: Stocks
DJIA, + 0.41%
were to open higher on Friday. There has been little reaction to bond market data. The yield of the 10-year Treasury note
TMUBMUSD10Y, + 0.35%
was down 0.1 basis points to 2.845%.
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