Inflation firmed and Americans’ spending and income surged in January, which could prompt the Federal Reserve to raise interest rates higher than previously anticipated this year to cool price pressures.
The Fed’s preferred inflation gauge—the personal-consumption expenditures price index—rose 5.4% in January from a year earlier, the Commerce Department said Friday. The core index, which excludes food and energy and is seen as a better predictor of future inflation, rose 4.7%. Both readings were up slightly from those for the 12 months through December. The central bank aims for 2% annual inflation.
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