US consumer spending posts solid rise

Source: Xinhua | 2018-08-31

US consumer spending rose a solid 0.4 percent in July, the sixth straight month of healthy gains. At the same time, a key gauge of inflation saw its sharpest annual gain in six years, likely keeping the Federal Reserve to continue raising interest rates.

The July spending gain, fueled by strong job growth and tax cuts, followed a similar 0.4 percent rise in June, the government said yesterday. Inflation, as measured by a barometer closely watched by the Fed, rose 2.3 percent for the 12 months that ended in July, the fastest year-over-year rise since 2012.

Though the inflation figure exceeded the Fed’s 2 percent target, its officials have said they’re willing to tolerate slightly higher inflation temporarily in light of a six-year period when it fell short of the Fed’s 2 percent goal. They are widely expected to keep gradually raising their benchmark rate, thereby leading to slightly higher rates on many consumer and business loans.

Andrew Hunter, US economist at Capital Economics, predicted the Fed will feel the need to raise rates once a quarter into next year.