By Jeffrey Sparshott and Eric Morath 

A broad measure of inflation poked above 2% for the first time in two-and-a-half years in December, a sign of diminished economic slack that could support additional moves by the Federal Reserve to raise interest rates this year.

The consumer-price index, a measure of what Americans pay for everything from gasoline to gym memberships, increased 2.1% from a year earlier, the largest year-over-year rise since June 2014.

The latest figures -- driven in part by an uptick in energy prices -- suggest a four-year stretch of historically low inflation could be ending as the expansion advances and unemployment recedes.

The Fed "will be on the lookout for any price pressures showing signs of overheating in the economy," said Mickey Levy, chief economist at Berenberg Capital Markets. "The risks are for more Fed rate hikes than currently expected."

Prices were up 2.2% when excluding sometimes volatile food and energy categories and have been above 2% by that measure since late 2015. .

The Fed targets a 2% annual inflation rate, though its preferred gauge is the Commerce Department's personal-consumption expenditures price index. As measured by the PCE index, U.S. inflation gained a modest 1.4% in November from a year earlier. It has undershot the central bank's threshold for the past 4 1/2 years, but at 1.4% has firmed from readings close to zero in 2015.

Fed policy makers in December decided to raise the central bank's benchmark interest rate for the second time in a decade, a reflection of their growing confidence that the economy is gaining firmer footing. Officials have penciled in an additional three quarter-percentage-point increases this year.

The incoming administration of Donald Trump is one wild card in Fed calculations.

While concrete plans remain uncertain, economists expect the president-elect to lower taxes and spend more on infrastructure. That could lead to faster economic growth and accelerating inflation.

"We expect an acceleration in wage growth and a large fiscal stimulus to push both headline and core [consumer-price] inflation up towards 3% this year," said Andrew Hunter, U.S. economist with Capital Economics.

Fed governor Lael Brainard on Tuesday said a cautious path on rates remains appropriate but warned that government tax and spending programs meant to boost short-term growth could stoke inflation and cause the central bank to raise rates faster. Other Fed officials have echoed her concerns.

Still, other indicators remain mixed. The labor market has been adding jobs at a steady clip and wages are rising. But not all sectors appear to be operating close to full capacity -- a separate Fed report out Wednesday showed that manufacturing output has barely inched ahead over the past year. Manufacturers are operating at 74.8% of their capacity, the Fed said, still well below prerecession levels.

A strengthening U.S. dollar, which makes American products more expensive overseas, has been one factor holding back factories. But that has also pushed down the cost of foreign products in the U.S., helping keep the prices of many goods in check.

Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com and Eric Morath at eric.morath@wsj.com

(END) Dow Jones Newswires

January 18, 2017 12:52 ET (17:52 GMT)