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U.S. labor costs point to still-benign inflation

A worker labors at a romaine lettuce farm outside San Luis, Arizona November 9, 2010. REUTERS/Eric Thayer

WASHINGTON (Reuters) - U.S. labor costs rose marginally in the third quarter, pointing to tame wage inflation that should allow the Federal Reserve to maintain its bond-buying program to stimulate the economy.

The Employment Cost Index, the broadest measure of labor costs, increased 0.4 percent after advancing 0.5 percent in the second quarter, the Labor Department said on Tuesday.

Economists polled by Reuters had expected labor costs to increase 0.5 percent. In the 12 months through September, compensation costs rose 1.9 percent for a fifth straight quarter.

During periods of strong economic growth, the U.S. central bank closely monitors the index for signs of wage inflation.

High unemployment amid a tepid economic recovery is keeping a lid on wage pressures.

Some Fed officials have expressed concerns about inflation being too low. That makes it unlikely the central bank will scale back its monthly $85 billion bond-buying program this year.

The monthly purchases are intended to boost demand by keeping longer-term borrowing costs low.

Wages and salaries, which account for 70 percent of employment costs, rose 0.3 percent in the third quarter after gaining 0.4 percent in the prior period.

They were up 1.6 percent in the 12 months through September, slightly down from 1.7 percent in the same period in 2012.

Benefit costs increased 0.7 percent in the July-September quarter, the largest gain in more than a year, after rising 0.4 percent in the second quarter.

Benefit costs rose 2.2 percent in the 12 months through September after advancing 2.4 percent in the period through September 2012.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)