WASHINGTON, June 17: A leap in energy costs pushed up US wholesale prices 1.4 per cent in May while a closely watched “core” inflation rate remained tame, government data showed on Tuesday.

The hotter-than-expected inflation data was the latest in a series of reports that have put the US Federal Reserve on alert against price pressures despite a weak economy.

The Labour Department’s producer price index, a gauge of inflation at the wholesale level, showed a similar trend to consumer inflation released last week led by energy and food.

The core rate, which excludes volatile energy and food components, rose a modest 0.2 per cent in the month.The headline PPI was sharper than Wall Street expectations of a 1.0 per cent rise while the core rate was in line with forecasts.

The overall PPI rose at the fastest pace since November, and pushed up the 12-month PPI to a whopping 7.2 per cent rate. Core prices have risen 3.0 per cent in the month.

Analysts said that the report is not cause for alarm but could become troublesome if inflation starts seeping into other prices.

Jennifer Lee at BMO Capital Markets said “the headline was a little bit of a shock,” and that “that there is more upside risk of even higher prices being filtered down to the consumer level at some point, should current sky-high prices for various food commodities hold.”“So far evidence on pass-through (outside food and energy) has been encouraging for the longer-term inflation outlook,” said economist Aneta Markowska at Societe Generale.

“There is very little ability to pass cost hikes onto consumers and we also see no evidence of wage pressures. The good news, however, will not be very comforting for Fed officials given the inflation pressures still in the pipeline.”

Recent inflation data has shifted the tone of the Federal Reserve despite a sluggish US economy. Hawkish comments from Fed chairman Ben Bernanke and others have raised the prospects of higher interest rates to keep inflation in check, after a series of rate cuts by the Fed to stimulate flagging growth.

A major question for the Fed is whether weak US economic activity will keep price pressures in check.—AFP