U.S. retail sales and inflation rose in January, strengthening the case for the central bank to raise interest rates.
Retail sales advanced four-tenths of a percent for the month. PNC Bank economists Gush Faucher says the gain is partly due to an improving labor market with "more jobs and rising wages" as workers become more scarce.
Economists watch retail sales because consumer demand drives most U.S. economic activity.
A separate report shows U.S. consumer prices rose at the fastest pace in nearly four years, with costs gaining six-tenths of a percent in January and 2.5 percent in the past year.
The Federal Reserve works to keep prices rising at a modest two percent annual rate, and can raise interest rates to lower inflation.
Yellen's testimony
In comments to congressional committees this week, Federal Reserve Bank Chair Janet Yellen made it clear officials are considering a series of rate hikes this year, but did not say exactly when they would make those adjustments.
The Fed's next meeting to consider interest rate policy is scheduled for mid-March.
The U.S. central bank slashed interest rates to nearly zero during the recession in a bid to boost economic growth, but most economists say the recovering U.S. economy no longer needs such support. Yellen said Tuesday that waiting too long to raise rates could allow inflation to spike and force the Fed to boost rates sharply which could disrupt the economy.
