NEW YORK (CNN/Money) -
Personal spending was virtually unchanged in January while consumer incomes slipped, the government reported Monday.
Meanwhile, a bigger-than-expected pickup in a key reading on inflation sparked some worries among bond investors that the Federal Reserve might raise interest rates faster than expected.
While spending was flat, personal income fell 2.3 percent in January after hitting a record in December on a big dividend payout by Microsoft Corp., the Commerce Department said in its report. Excluding that payout and other factors, income rose 0.5 percent in January compared with a 0.6 percent gain in December.
Economists had forecast personal income to fall 2.6 percent and spending to rise 0.1 percent, according to surveys by Briefing.com.
Spending and income are watched closely by policy-makers and investors since spending fuels more than two-thirds of the nation's economy.
The department also said the price index for consumer spending, a measure of inflation, gained 0.2 percent in January and rose 0.3 percent when volatile food and energy prices were stripped out. That's a sharp pickup from December's flat readings and marked the biggest monthly increase in core prices since October 2001.
"I would point to the core PCE deflator, which gave a modest upside surprise," Lara Rhame, foreign exchange strategist at Credit Suisse First Boston in New York, told Reuters, referring to the personal consumption expenditure reading. "This is the Fed's preferred measure of inflation ... and might have markets pricing in a more aggressive Fed."
On a year-over-year basis, core prices increased 1.6 percent -- matching the fourth-quarter pace posted in Friday's gross domestic product report.
The Fed has raised rates six times since last June to head off inflation concerns, and has said it should be able to continue to increase borrowing costs at a "measured" pace. Most analysts believe that implies quarter-percentage point rate hikes and markets are watching for data that could encourage policy-makers to be more aggressive.
Treasury prices ticked lower after the core inflation reading, pushing the yield on the 10-year Treasury note to 4.28 percent from 4.27 percent late Friday. Bond prices and yields move in opposite directions.
The personal savings rate was 1.0 percent in January, indicating that Americans were setting aside 1 cent from each dollar earned. That was down from 3.6 percent in December.
-- Reuters contributed to this report