U.S. producer prices increased slightly more than expected in June amid gains in the cost of services and motor vehicles, leading to the biggest annual increase in 6-1/2 years.

The report published by the Labor Department also showed a pickup in underlying producer inflation last month. The data supports views of steadily rising price pressures, which will probably allow the Federal Reserve to increase interest rates two more times this year.

The producer price index for final demand climbed 0.3% last month after rising 0.5% in May. In the 12 months through June, the PPI advanced 3.4%, the largest gain since November 2011. Producer prices increased 3.1% year-on-year in May.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.3% last month. The so-called core PPI edged up 0.1% in May.

In the 12 months through June, the core PPI advanced 2.7% after increasing 2.6% in May. Manufacturers have been facing a rise in the cost of inputs, but so far have not passed on most of the increases to consumers.

Inflation is gradually rising against the backdrop of a labor market that is viewed as being near or at full employment.

The Fed's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, hit the U.S. central bank's 2% target in May for the first time in six years.

The Fed raised interest rates in June for the second time this year and has forecast two more rate hikes by the end of 2018. U.S. financial markets were little moved by the data.

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