WASHINGTON (MarketWatch) — The rate of inflation in consumer goods and services topped 2% in February for the first time since 2012, a trend that could lead to higher borrowing costs for households and businesses unless it abates soon.

The rate of inflation, as measured by the government’s PCE index, is now above Federal Reserve’s 2% long-term target, a potential trigger for more increases in interest rates in the months ahead. The central bank lifted rates earlier this month owing to an improved economy and higher inflation.

The PCE index is the preferred tool for the Fed to measure inflation.

Consumer spending, meanwhile, showed a scant 0.1% increase last month, the Commerce Department reported Friday. Economists polled by MarketWatch has forecast 0.2% gain.

Americans spent more on drugs, health care and travel, but less on new cars and utilities during the second warmest February in 123 years.

The slowdown in spending for the second straight month — abetted by tardier than usual tax refunds — is another chink in official scorecard for the economy, known as gross domestic product. Less spending by consumers is likely to keep GDP on the low side in the first quarter. Economists polled by MarketWatch forecast 1.7% growth.

The good news is, the incomes Americans earn rose a healthy 0.4% in February, boosting the savings rate rose to 5.6% from 5.4%. Consumers have enough money to give the economy a positive jolt as warmer weather arrives.

“It’s hard to be concerned about consumers when jobs and confidence are doing what they’re doing and balance sheets are in such improved shape,” said Ted Wieseman, an economist at Morgan Stanley.

Yet the bigger story was continued upward pressure on inflation.

The PCE index rose 0.1% in February, bringing the increase over the past 12 months to 2.1%. It’s the first time the yearly rate of inflation has topped 2% since March 2012.

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Much of the increase in inflation over the past year and a half has been driven by a rebound in oil prices. Some relief for consumers could come soon with gasoline prices leveling off, but the cost of other staples such as housing, medical care and financial services have been increasing more rapidly.

What’s more, wages have started to rise more quickly amid growing shortages of skilled workers in certain fields such as construction and manufacturing. That’s also putting upward pressure on inflation.

The so-called core rate of inflation that strips out food and energy, meanwhile, rose 0.2% in February. The core rate has climbed 1.8% in the past 12 months.