Two key U.S. inflation gauges posted larger-than-forecast increases on Friday, heightening concerns that prices will remain persistently high and prompt continued aggressive interest-rate increases from the Federal Reserve.
The Labor Department’s employment cost index, a broad gauge of wages and benefits, increased 1.3% in the second quarter from the prior three months, compared with a 1.2% median estimate from economists. Separately, the Commerce Department’s personal consumption expenditures price index, which forms the basis for the Fed’s inflation target, rose on a monthly basis in June by 1%, the fastest since 2005.
Employers, with a near-record number of open positions, are trying to attract and retain workers with higher pay and other perks, while consumers are being squeezed across the board and particularly by food and fuel costs. Fed officials have implemented the steepest interest-rate hikes in decades and have signaled their top priority is to reduce high inflation, though speculation mounted in financial markets this week that a slowing economy will force the central bank to lower borrowing costs early next year.
