NEW YORK (CNN/Money) - Both consumer spending and personal income posted stronger than expected gains in March, as rising prices forced consumers to spend more for the goods and services they wanted, according to a government report Friday.

The Commerce Department report showed personal income up 0.5 percent, compared with a revised 0.4 percent rise in February. Economists surveyed by Briefing.com had forecast a 0.4 percent gain.

The report also showed spending by consumers gained 0.6 percent, following a revised 0.7 percent increase in February. Economists had also forecast a 0.4 percent rise in spending.

But much of the gain in consumer spending was driven by higher prices. Their inflation-adjusted purchases rose only 0.1 percent in the month, down from a real 0.4 percent rise in spending on that basis in February.

The report also showed prices paid by consumers rose 0.5 in the month, following a 0.3 percent gain in February. Excluding prices paid for often volatile food and energy, prices rose 0.3 percent in the month, following a 0.2 percent gain in February.

Those numbers are among the inflation measures monitored by the Federal Reserve. Fed policy makers meet Tuesday to consider what interest rate hikes are necessary to combat inflationary pressures.

Anthony Chan, senior economist with JPMorgan Fleming Asset Management, said that even with the faster increase in prices, he doesn't think the Fed will be alarmed by the new data.

"I think the Fed certainly looks at this as building up as pricing power on the part of companies," said Chan. "But (the price index) is still within the tolerable range for the Fed. That's not to say the Fed can relax and go on vacation, but I would say they're a relatively benign."

The report showed consumers apparently cutting their savings rate from already low levels to handle the increased prices.

Personal savings, which reflects what is left over after expenditures are subtracted from disposable income, fell to $35.1 billion, or 0.4 percent, compared to a 0.5 percent savings rate in February. That means that the average household is saving only $4 for every $1,000 of take-home pay every month.

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