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Home / Business / The Fed's preferred inflation measurement reaches the target for the first time in 6 years

The Fed's preferred inflation measurement reaches the target for the first time in 6 years




(Reuters) – Consumer prices in the US accelerated through May through to May, with the US Federal Reserve's inflation rate targeting 2% for the first time in six years.

Consumer prices, as measured by the Price Index for Private Expenditure (PCE), rose 0.2% after a similar increase in April, the Commerce Department said Friday. In the twelve months to May, the PCE price index increased by 2.3 percent.

That was the biggest gain since March 2012, following a 2.0 percent rise in April. The PCE price index, excluding the volatile food and energy components, rose 0.2 percent for the sixth month in a row.

The so-called core PCE price index rose by 2.0 percent year-on-year, the largest increase since April 201

2. The annual core PCE price index rose by 1.8 percent in April. The core PCE index is the preferred inflation measure of the Fed.

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The US Federal Reserve raised interest rates this year for the second time earlier this month and predicted two more rate hikes by the end of 2018.

The acceleration of inflation last month came despite a moderate consumer spending. The government said consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.2 percent last month. April data has been revised down to show that spending will increase by 0.5 percent instead of the previously reported 0.6 percent increase.

Economists polled by Reuters forecast May spending at 0.4 percent. Spending was dampened by a decline in budget expenditure. Purchases of durable goods such as cars rose 0.1 percent last month. Procurement of consumer goods increased by 0.4 percent. Expenditure on services increased by 0.1 percent.

Adjusted for inflation, consumer spending in May remained flat after rising 0.3 percent in the previous month. Household growth slowed to 0.9 percent on an annualized basis in the first quarter, the lowest rate in nearly five years, after rising 4.0 percent in the fourth quarter.

In May, personal income rose 0.4 percent after a plus of 0.2 percent the previous month. Wages increased by 0.3 percent. Savings rose from $ 448.0 billion in April to $ 482.0 billion last month. The savings rate climbed from 3.0 percent in April to 3.2 percent.

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(coverage by Lucia Mutikani, edited by Andrea Ricci)


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