WASHINGTON _ Consumer spending rose in September by the most in three months as incomes improved, the Commerce Department said Monday.
The 0.5 percent increase in personal consumption spending provided momentum for a key driver of the U.S. economy heading into the year's final quarter and could push the Federal Reserve closer to another small interest-rate increase.
Central bank policymakers meet this week, although they are not expected to make a change in their benchmark short-term rate so close to the presidential election. But Fed Chairwoman Janet L. Yellen has said she expects a small increase before the end of the year if the economy and labor market continue to improve.
An increase in inflation in September also boosted the chances of a rate incease.
The Commerce Department reported Monday that the personal consumption price index, the Fed's preferred inflation measure, increased to 1.2 percent for the 12 months ended Sept. 30. That was the highest in nearly two years and moved inflation closer to the Fed's annual target of 2 percent.
Core inflation, which excludes food and energy prices, held steady in September at 1.7 percent, matching the highest level since mid 2014.
The increase in spending in September came after a 0.1 percent decline in August.
Personal income increased 0.3 percent in September after rising 0.2 percent the previous month. With spending outpacing income growth, the savings rate fell. Americans saved 5.7 percent of their disposable income, the Commerce Department said.
The Commerce Department reported Friday that the U.S. economy grew at a 2.9 percent annual rate from July through September, a significant improvement from a weak first half of the year.
