US inflation rate rises; Slow economy can limit gains

By Lucia Mutikani

WASHINGTON (Reuters) – US consumer prices rose the most in 1[ads1]5 months in April, but a decline in spending pointed to a decline in economic growth that could keep inflationary pressures moderate.

The Report from the Commerce Department on Friday supported the Federal Reserve Mayor Jerome Powell's view that a recent disinfectant trend "may end up being temporary."

Inflation is below the US Central Bank's 2.0% target. That, along with the slow economy, has increased conversations, including from President Donald Trump, for the Fed to cut interest rates. The Fed this month kept prices unchanged and signaled little desire to adjust monetary policy anytime soon.

"The Fed is a good place for today's policy, but it will not be long if the market forecasts for price reductions are to be believed," said Chris Rupkey, chief economist at MUFG in New York. can only get them if this downturn continues and Fed caves to public opinion. "

Consumer prices measured by the Personal Consumer Price Index (PCE) increased 0.3% last month, the biggest gain since January 2018, after increasing 0 , 2% in March

It raised the annual increase in the PCE price index to 1.5% from 1.4% in March, increasing inflation by higher gasoline and service prices, which offset a decrease in the cost of food

In addition to the volatile food and energy components, the PCE price index rose 0.2% last month, having increased by 0.1% in March. In the 12 months to April, the so-called core PCE price index 1 increased , 6% after increasing 1.5% in March

Core PCE index is Fed preferred Weekly Inflation Measurement It hit the US central bank's 2% inflation target in March 2018 for the first time since April 2012.

A much weaker inflation rate than was seen in the first quarter had led economists to predict the annual core PCE price index would remain at 19% in April.


Economists said it was unclear what the consequences for inflation would be from Trump's announcement late on Thursday that he would impose a tariff on all goods from Mexico in a bid to vote the tide for illegal immigration over it American and Mexican border.

But the tasks, as Trump said, would start with 5% on June 10 and increase monthly to 25% on October 1, unless Mexico took immediate action, expecting to deficit growth.

Washington is already running a trade crisis with China that has recently escalated and led consumers to predict higher prices. A survey from the University of Michigan on Friday showed that consumer inflation expectations over the next 12 months rose to 2.9% in May from 2.5% in April.

"There is little doubt that economic growth will suffer every day these tariffs remain in place," said Kevin Giddis, director of interest market markets at Raymond James in Memphis, Tennessee. "What we are not sure is whether it will be inflation. If it is, there are not many places to hide. "Wall Street shares traded lower as tariffs on Mexican goods rattled investors. [19659017] The dollar slipped towards a basket of currencies, while the benchmark US Treasury bond fell to a 20-month

Consumer spending, which accounts for more than two-thirds of US economic activity, increased by 0.3% as consumers reduced their purchases of long-lasting manufactured goods such as motor vehicles, and also spent less on services, including household electricity and gas. 19659018] Consumer spending jumped 1.1 percent in March, the largest increase since August 2009. When adjusted for inflation, consumer spending was unchanged in April, this so-called real consumer spending rose 0.9% in March

The weak real spending cost in April gave soft reports on industrial production, orders for long-lasting goods and domestic sales by suggesting lower economic growth st in the second quarter.

As a result, the Atlanta Fed cut its second-quarter GDP estimate by one-tenth of a percentage point to a 1.2% annual interest rate. The economy grew at a 3.1% rate last year, flattened by the volatile export, inventory and defense components.

But consumer spending is still supported by a strong labor market. The lowest unemployment rate for almost 50 years is steadily increasing wages.

Personal income increased by 0.5% in April, with salaries of 0.3%. Revenues increased by 0.1% in March. The savings increased to $ 990.3 billion in April from $ 963.7 billion in March.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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