Consumer spending surged 0.8% last month from March, the Commerce Department reported.

Inflation by the Fed's preferred gauge accelerated to 4.4% from a year ago, with core prices — a key measure of the trajectory — gaining 4.7%, up from the 4.6% pace in March.

The Fed targets 2% inflation. Fed Chair Jerome Powell earlier this month signaled it may be time for the central bank to pause its rate-hike campaign after 10 straight months of increases. But he and others said they will keep a watchful eye on data.

That robust data, along with what appeared to be some progress on a deal to raise the debt limit and avoid a catastrophic default, pushed traders of futures contracts tied to the Fed policy rate to bet the Fed is not done raising interest rates.

"Inflation remains stubborn," said Art Hogan, chief market strategist at B Riely Wealth. "It feels like we're getting the debt ceiling drama close to the finish line, but we still have to be concerned about what's next for the Fed."

Implied yields on the contracts now show traders see about a 60% chance the Fed will increase its target range for the benchmark rate, currently at 5%-5.25%, by a quarter of a percentage point at its June meeting. Earlier in the day the contracts were pricing in about a 60% chance the Fed would skip a June rate hike.

• Inflation Remains High, as Key Gauge Rises to 4.4%
• Consumer Spending, Up 0.8%, Beats Expectations