Producer prices up on surging gasoline, core rate flat

WASHINGTON, Fri Oct 12, 2012 – Producer prices rose more than expected in September as the cost of energy surged, a government report showed on Friday, but underlying inflation pressures were muted.

The Labor Department said its seasonally adjusted Producer Price Index increased 1.1 percent last month.

Economists polled by Reuters had expected prices at farms, factories and refineries to rise 0.7 percent last month.

Despite the rise in overall wholesale inflation last month, there is likely to be little pass-through to consumers given sluggish job growth, which puts a brake on inflation.

Wholesale prices excluding volatile food and energy were flat last month. That was the lowest reading since October 2011 and fell short of analysts’ forecasts.

Consumer inflation is currently below the Federal Reserve’s 2 percent target, and many economists think it will trend below that level for years to come.

In a bid to boost economic activity, the Fed launched an aggressive new stimulus program last month, pledging to buy $40 billion of mortgage-backed debt a month until the outlook for jobs improves substantially.

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