U.S. consumer spending rose slightly more than expected in February for the eighth straight month of gains as households tapped their savings, government data showed on Monday, while inflation accelerated at its fastest pace since June 2009.

KEY POINTS: * The Commerce Department said spending rose 0.7 percent after an upwardly revised 0.3 percent gain in January. * Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to advance 0.6 percent in February after a previously reported 0.2 percent rise.

COMMENTS:

JOSEPH TREVISANI, CHIEF MARKET ANALYST, FX SOLUTIONS, SADDLE RIVER, NEW JERSEY:

The PCE numbers will help both sides of the QE dispute. Inflation is higher but not by enough to worry Bernanke.

PAUL DALES, SENIOR US ECONOMIST, CAPITAL ECONOMICS, TORONTO:

February's U.S. personal and income spending data provide yet more evidence that higher prices are denting economic growth. The 0.3 percent m/m increase in nominal income was not too bad - incomes were up by 5.1 percent in the last year.

But as prices are rising at a faster rate, real incomes fell, by 0.1 percent m/m. That's the first drop since September.

Similarly, higher prices, especially for gasoline, meant that the decent 0.7 percent m/m gain in nominal spending translated into a modest 0.3 percent m/m increase in real spending. That's better than in either of the previous two months, but it's still not much to shout about.

Even if real spending were to increase by 0.3 percent m/m in March, real consumption in the first quarter will grow at an annualized rate of between 2.0 percent and 2.5 percent. That would suggest the 4.1 percent gain seen in the fourth quarter of last year was just another false dawn.

MICHAEL WOOLFOLK, MANAGING DIRECTOR, BNY MELLON GLOBAL MARKETS, NEW YORK:

Judging from the CPI, PPI and PCE data, core inflation has bottomed and begun to rise, albeit at a glacial pace. From Bernanke's perspective, today's data reaffirms the need to maintain the current QE II program until inflation and unemployment return to more desirable levels. At the same time, the personal savings rate remains comfortably above the 5.0 percent level, despite signs that the consumer spending is picking up. Without explicit evidence of inflationary problems in the core, it is difficult to imagine Bernanke's dovish position being altered in any material way. Plosser's comments on Friday not withstanding, it is premature to expect any sustained campaign of monetary tightening from the Fed.

WAYNE KAUFMAN, CHIEF MARKET ANALYST, JOHN THOMAS FINANCIAL, NEW YORK:

All these numbers look reasonably in line, so there's no surprise. You're seeing really a nil reaction in futures.

DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL, STAMFORD, CONNECTICUT:

The headlines were close to consensus expectations but some of the underlying components are a bit tedious. Real PCE and income gains were tame to say the least versus their nominal components showing that higher prices are behind most of the gains versus a real increase in spending.

So, higher prices represent a tax in the sense incomes are not holding pace. Real income ex transfer were 0 percent. Thus Q1 GDP looks weaker than the consensus forecasts at this stage.

The bond market, of course, is weaker as it faces supply and the curve is pretty steady through it all. Is it a focus on inflation implied in this report? We're not sure but suspect supply is its own 'reward.'

FRANK LESH, A FUTURES ANALYST AND BROKER, FUTUREPATH TRADING LLC, CHICAGO:

The consumption number was good and that is supportive for the market. There was some thought that consumer spending might not be holding up in the current environment and this says those worries may be unfounded -- at least for the time being.

MARKET REACTION: STOCKS: U.S. stock index futures hold slight gains. BONDS: U.S. Treasury debt prices widen their losses. FOREX: The dollar holds steady at higher levels versus the euro and yen.

Inflation