US Consumer Spending Rises Boosting September Rate Hike Chances

U.S. consumer spending increased for a fourth straight month in July amid strong demand for automobiles, pointing to a pickup in economic growth that could pave the way for the Federal Reserve to raise interest rates this year.

Monday’s report from the Commerce Department came several days after Fed Chair Janet Yellen said the case for raising rates had strengthened in recent months. Low inflation, however, suggests the U.S. central bank could wait until its December policy meeting before raising borrowing costs.

“This report is a mixed bag for the Fed. While the consumer sector is continuing to advance solidly, progress towards the Fed’s inflation mandate has stalled,” said Michelle Girard, chief economist at RBS in Stamford, Connecticut. “It strengthens the case for an increase in interest rates, but does not suggest an urgency for policymakers to act in September.”

The Commerce Department said that consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 percent last month after a 0.5 percent gain in June.

via Reuters

Rise in interest rate - image