By Anna Saphir
(Reuters) – Policymakers from the Federal Reserve received a dose of unexpectedly strong economic data on Friday, which strengthened the case for further tightening of credit conditions to slow the economy and reduce long-term inflation.
Consumer spending rose 0.8% last month in March, the Commerce Department reported. Inflation by H preferred estimate accelerated to 4.4% year on year, and the core gauge, a key reading of the price hike path, rose to 4.7%, from 4.6% in March.
This is targeting 2% inflation. Federal Reserve Chairman Jerome Powell signaled earlier this month that it was time to stop the cycle of rate hikes after 10 straight months of tightening.
However, both Powell and other officials from the agency have made it clear that much depends on the data economy in the US.
Given the strong data, along with what appeared to be some progress on a deal to raise the debt ceiling and avoid a default, traders were predicting the future of the H rate plan as it failed to raise the H rate.
“Inflation remains stubborn,” said Art Hogan, chief market officer at B Riely Resources. “It looks like we’re getting closer to the goal of the debt ceiling drama, but we’re still worried about what’s in H.”
The tacit contract yields rose, considering a 60% chance that H will increase its target rate, currently between 5% and 5.25%, by a quarter of a percent at its meeting.
Earlier in the day, futures contracts had a 60% chance that the Federal Reserve would not move rates in June.
(Edited in Spanish by Carlos Serrano and Marion Giraldo)