Pay growth and prices picked up, keeping the Fed on track for rate increases

A wage growth measure that the Federal Reserve watches closely climbed swiftly in the three months through June and prices increased sharply last month, fresh economic reports showed on Friday, developments that are likely to keep the central bank on track for future rate increases even as the economy shows some signs of cooling.

Prices climbed by 6.8 percent in the year through June, the fastest for the Personal Consumption Expenditures index since 1982. Inflation also jumped by 4.8 percent over the past year after removing food and fuel — which economists do to get a sense of underlying trends — a slightly larger increase than the 4.7 percent increase that economists in a Bloomberg survey had expected.

At the same time, a separate report showed that wages climbed briskly, albeit not enough to keep up with inflation. The Employment Cost Index climbed by 5.1 percent in the second quarter compared to the same period last year, and the index’s measure of wages and salaries also picked up strongly.