Inflation is here.

On Friday the latest report on personal income and spending, which also provides the Fed’s preferred core PCE inflation measure, beat expectations all around.

And the big takeaway is that core prices, which exclude the more volatile cost of food and gas, in January rose 1.7% over the same month last year, topping expectations for 1.5% and indicating that inflation pressures are starting to perk up in the economy.

The Fed’s inflation target is 2%.

Last week we got data showing that the consumer price index rose 2.2% over last year on a core basis, the fastest rate in over four years.

And so taking Friday’s report together with last week’s numbers, it seems that after years of disappointment with respect to meetings its inflation target, the Fed is starting to make real progress toward its goal.

Recall that back in September, when the Fed was expected by some to raise interest rates but passed because of market volatility — Fed Chair Janet Yellen said the Fed’s credibility rested on its ability to meet its inflation target.

Much of the resistance to an interest-rate increase, which the Fed did carry out in December, hinged on the fact that inflation was still running below target.

Economist Paul Krugman, for example, wrote last year:

So the Fed should not be eager to raise rates until inflation and wage growth are at least at, and preferably above, where they were before the bottom fell out. And it certainly shouldn’t be conveying the impression that 2 per cent is not a target but a ceiling, which is exactly what it would do with a rate hike.

But in January we saw that wages grew 2.5% compared with the prior year, and with inflation now perking up the Fed is making indisputable progress toward its inflation goals. In other words, March 16 is now on the table for a rate hike.

Elsewhere in Friday’s report, both personal income and personal spending beat expectations with in increase of 0.5%. Expectations were for the report to show a 0.4% increase in income during January, while spending was set to rise 0.3%.

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