USA annual inflation measures jump; consumer spending picks up


Any doubt that the Federal Reserve has fallen behind the interest rate curve should have been dispelled by recent US price and wage inflation data, as well as by the sharp sell-off in long-dated US Treasury bonds. Other Fed officials argue that such a move would run the risk of allowing inflation pressures to get out of hand and force the central bank to slam on the brakes by raising interest rates so quickly that it could push the country into a recession. Inflation measures how the prices of those goods and services are changing.

The core personal consumption expenditures (PCE) price index rose 0.2 percent in March, matching estimates.

That was the biggest gain since February 2017 and followed a 1.7 percent rise in February.

MSCI's gauge of stocks across the globe shed 0.15 percent.

Purchases rose 0.4 percent from the prior month, the Commerce Department figures showed - but consumer spending grew at a 1.1 percent annualized rate between January and March, which was the slowest in almost five years.

While the inflation rate for PCE excluding food and energy was 1.8 percent.

Last month´s increase was in line with economists´ expectations.

Earlier in the session, it was reported that New Zealand's jobless rate fell to a fresh nine-year low in the first quarter, adding to signs that sluggish wage growth will eventually pick up.

The uptick in inflation won't knock policy makers off their path of gradual increases in interest rates although it will eventually prompt them to pencil in four hikes for this year, instead of the three now forecast, said Peter Hooper, chief economist for Deutsche Bank Securities in NY.

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But futures markets on Tuesday afternoon gave about a 50 per cent chance the Fed would raise rates again in June, September and December - a prospect that has gnawed at investors since February.

The first rate hike of the year was adopted in March and the Fed is widely expected to hold its fire this time. U.S. Treasury yields edged lower.

In U.S. economic news, the ISM manufacturing index hit 57.3 in April.

Investors also think US President Donald Trump's tax cuts and spending plans, unusual economic stimulus at a time of solid economic expansion, could further fuel inflation and prompt a faster pace of rate rises.

According to Reuters, "The PCE price index was unchanged on a monthly basis after advancing 0.2 percent in February". Personal income increased 0.3 percent in the month, the same growth in the previous month.

Elsewhere the Australian dollar sank to an 11-month low of $0.74725 in overnight trade and last stood at $0.7504.

Apple shares rose about 4 percent after the closing bell after the company beat revenue and profit expectations in its March quarter.

The uptick comes amid a months-long rally for the currency, culminating in a 2.5% rise over the past two weeks.