US Dec spending, inflation data encouraging, risks remain: Think tank

US savings rates remain far lower than they were prior to the pandemic

Consumer spending remained robust in December, but real disposable personal income cooled from earlier in the quarter. While both headline and core inflation rates ticked up slightly from the month prior, they remain within an encouraging month-on-month range. Both measures continue to converge toward the Federal Reserve’s (Fed) 2-per cent target.

A deviation from the ongoing spending to income trend is needed to achieve a soft landing for the economy. However, at this point, the think tank is not confident that this will occur and a broader pullback in consumer spending may await later this year.

While continued disinflation is likely, it is too early to celebrate and the Fed will likely err on the side of caution and keep interest rates steady into the second quarter this year, Erik Lundh, principal economist at the think tank, wrote on its website.

ALCHEMPro News Desk (DS)