Personal incomes rose 10 percent and inflation remained low in January as another round of coronavirus aid hit U.S. households, according to data released Friday by the Commerce Department.
Consumer spending rose by 2.4 percent and disposable income rose by 11.4 percent in January shortly after former President Trump and Congress approved a second round of stimulus checks and the renewal of expanded unemployment benefits. Personal incomes had increased just 0.6 percent in December after two straight months of declines.
Americans also saved a whopping 20.5 percent of their disposable income in January, more than twice the pre-pandemic savings rate.
Despite the injection of stimulus, inflation as measured by the personal consumption expenditures price index minus food and energy — the Federal Reserve’s preferred metric — was just 1.5 percent in the year since December 2019 and 0.3 percent in January
The Fed’s ideal level of annual inflation is 2 percent, though the bank is hoping to keep inflation slightly above that target to make up for years of shortfalls.
The latest income and inflation data comes as the White House and Fed try to temper fears that further fiscal and monetary economic support could spur rampant price and wage increases as the U.S. nears the end of the pandemic.
The House is scheduled to vote Friday on President Biden’s $1.9 trillion economic relief bill, which would provide another round of direct payments to households, extend enhanced unemployment benefits, aid to state and local governments, and more forgivable loans to small businesses.
Fed Chairman Jerome Powell also said this week that the bank will not hike rates or reduce its monthly Treasury and mortgage bond purchases until the labor market recovers from the pandemic, annual inflation returns to 2 percent and is on track to exceed that level.
Updated at 1:09 p.m.