Food, Energy Costs Push up Wholesale Prices

Wholesale inflation stayed tame last month outside of a sharp rise in food and energy prices.

Moderate price inflation allows the Federal Reserve to keep the short-term interest rate it controls at a record low of nearly zero, where it has been since December 2008. Low inflation also makes it more likely the Fed will launch another effort to lower longer-term rates by purchasing Treasury bonds when it meets next on Nov. 2-3.

The producer price index, which measures price changes before they reach the consumer, increased 0.4 percent in September, the Labor Department said Thursday. It rose by an equal amount in August.

Excluding volatile food and energy costs, core producer prices rose only 0.1 percent in September from the previous month. That rise was driven by higher car and truck prices. In the past year, core prices have risen only 1.6 percent.

A 1.2 percent rise in food prices and a 0.5 percent rise in energy prices drove the index up. Wholesale prices have increased 4 percent in the past year. The cost of meats and fresh vegetables drove the increase in food prices.

The weak economy is keeping a lid on prices. Frugal consumers are seeking out discounts and balking at higher costs. That has made it harder for producers to raise the prices they charge to retailers.

In addition, high unemployment is keeping paychecks low, so consumers can't afford to spend more.

Wholesale prices fell for three straight months in the spring and early summer. That stoked fears of deflation, a widespread and debilitating drop in prices, wages, and the value of homes and investments.

But the recent increases in the producer price index have eased those concerns. Federal Reserve officials saw "only small odds of deflation" at a meeting last month, according to the minutes released on Tuesday.