Higher Rates Will Put the Kibosh on Consumption Growth

If you think inflation is cutting into Americans’ spending, just wait to see what higher rates will do.

The Commerce Department on Friday reported that consumer spending rose 0.4% in August from July, after slipping 0.2% the previous month. However, the Commerce Department’s measure of consumer prices, which also happens to be the Federal Reserve’s preferred measure of inflation, also rose 0.3% in August. So real, or inflation-adjusted spending was up just 0.1%.

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