U.S. consumer spending rose moderately in February, and while inflation cooled, it remained elevated enough to possibly allow the Federal Reserve to raise interest rates one more time this year.
The slowdown in consumer spending reported by the Commerce Department on Friday followed the largest gain in nearly two years in January. Consumer spending, which remains supported by a tight labor market, appears on track to pick up this quarter after growing at its slowest pace in 2-1/2 years in the fourth quarter.
“First-quarter GDP growth looks to come in better than expected, though there is still a reasonable chance that consumers and the economy pull back a bit by mid-year,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “For the Fed, it could be one and done in May.”
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