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Inflation's Up, Spending's Down

The Fed has managed to drive prices up almost 2 percent

In their effort to stimulate the economy, Janet Yellen and her Federal Reserve colleagues are finally succeeding in generating higher inflation. Now the Fed is waiting for stronger growth to spur wage gains so U.S. households can spend more money.

Until then, workers are getting squeezed. The inflation measure tracked most closely by the central bank rose 1.8 percent in May from the previous year, the biggest 12-month gain since October 2012 and just shy of policymakers’ 2 percent goal, data released on June 26 showed. Yet after adjusting for inflation, consumer spending fell a second consecutive month.