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Index Shows Continued Wage and Benefit Gains

Meanwhile, house price inflation rises

U.S. labor costs increased solidly in the third quarter amid strong wage growth while house price inflation accelerated in August, the latest signs that the Federal Reserve could keep interest rates high for some time.

The reports on Tuesday pose a threat to efforts by the U.S. central bank to bring inflation to its 2 percent target. Fed officials started a two-day policy meeting on Tuesday. The U.S. central bank is expected to leave interest rates unchanged but maintain its hawkish bias at the conclusion of that meeting as a recent spike in U.S. Treasury yields and stock market sell-off have tightened financial conditions.

"Those wage increases are likely to keep inflation running above target while higher house prices could lead to a pick-up in shelter inflation," said Andrew Hollenhorst, chief U.S. economist at Citigroup. "For now, the Fed will remain on-hold, but the evident upside risk to inflation means Chair [Jerome] Powell and committee will keep potential further rate hikes on the table."

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