Wholesale Prices Increase 0.3%

Wholesale prices rose 0.3% last month, but the so-called core rate, which excludes food and energy, jumped by the largest amount in more than six years.

The price increase could set off alarm bells at the Federal Reserve and perhaps lead to steeper increases in interest rates if inflation pressures do not subside.

The gain reported Friday in the Labor Department’s producer price index, which is designed to track inflation pressures before they reach consumers, reversed a 0.3% decline in December.

Although the overall figure was in line with expectations, prices outside of food and energy jumped 0.8%, four times what analysts had expected. It was the biggest one-month jump since a 1% increase in December 1998.

Prices surged for tobacco, alcohol and new cars and trucks. And even outside of those areas, increases were widespread.

“This is probably a one-time pop, but we will have to watch carefully,” said David Wyss, chief economist at Standard & Poor’s in New York.

Wyss and other economists contended that special factors, such as increased state taxes on tobacco and alcohol, and the elimination of incentives on cars contributed to the increase.

They said they still expected consumer prices, which will be reported Wednesday, to rise by a moderate 0.2%.

But analysts conceded that if wholesale inflation did not subside and instead began to seep into consumer prices, then the Fed probably would start raising interest rates at a much quicker pace.

Energy prices fell for a second straight month, dropping 1% after a 2.5% plunge in December.

Food costs, which had surged in October because of hurricane damage to crops in Florida, dropped 0.2% as supplies returned to more normal levels.