U.S. inflation at 2 percent for first time in 6 years

U.S. inflation at 2 percent for first time in 6 years

Domestic consumer prices as measured by the personal consumption expenditures (PCE) price index jumped 2.0 percent year-on-year in March. It is calculated by staff at the Dallas Fed, using data from the Bureau of Economic Analysis (BEA). This was the biggest increase since February 2017 following a 1.7-percent increase in February this year.

Inflation by that measure was last above 2% in February of a year ago.

The Federal Open Market Committee considers 2 percent the ideal inflation mark, because it's typically a key indicator of strong economic health.

"The Fed put this on paper when in the minutes of its 20-21 March FOMC meeting, it noted that, ".all participants expected inflation on a 12-month basis to move up in coming months".

Purchases rose 0.4% from the prior month, matching estimates, after being little changed in February, Commerce Department figures showed April 30. Now with unemployment at a 17-year low of 4.1 percent, economists expect that tight labor markets will finally start to lift wage gains and overall inflation.

US consumer spending picked up in March while the Federal Reserve's preferred inflation gauge hit the central bank's 2% target for the first time in a year, reinforcing the outlook for further interest-rate hikes.


Fed officials will hold a regular meeting this week.

They are scheduled to meet for two days starting on Tuesday and are expected to leave interest rates unchanged in the current range of 1.50-1.75 percent.

Spending rose 0.4 percent in March, following a flat February and a 0.2 percent increase in January.

The Fed is one of the most important institutions in world finance because it sets interest rates and oversees leading banks in the world's largest economy.

The faster rise in spending compared to income growth meant that the saving rate slipped to 3.1 percent of after-tax income in March, down from 3.3 percent in February.

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