Wholesale Prices Shoot Up Most in 15 Months

MoneyNews
Tuesday, March 18, 2008

WASHINGTON -- Wholesale prices rose again in February as another hefty increase in energy costs offset falling food prices. Outside of food and energy, prices shot up at the fastest pace in 15 months.
The Labor Department reported Tuesday that wholesale prices were up 0.3 percent last month, following an even bigger 1 percent jump in January.

Outside of food and energy, the rise in inflation was a troubling 0.5 percent, the biggest increase for core inflation since a rise of 0.9 percent in November 2006.

The hefty February increase in core inflation raises concerns that relentless increases in energy costs over the past two years are beginning to spread to other areas of the economy.

That could act as a constraint on the Federal Reserve, which is trying to combat a serious economic slowdown by cutting interest rates to jump-start economic growth.

However, if inflation starts to be a problem, the Fed could be caught in the grips of stagflation, the malady of stagnant growth occurring at the same time that inflation is rising.

For the moment, Fed officials have said they view the threat of a recession as the bigger problem. Financial markets are looking for another aggressive rate cut on Tuesday, especially in light of the collapse over the weekend of Bear Stearns, Wall Street's fifth largest investment bank.

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