Spiking energy leads wholesale prices up

WASHINGTON >> Energy prices continued to rocket higher in February, though overall wholesale prices moderated after a record jump in January.

The Labor Department’s producer price index, which measures inflation before it reaches consumers. increased by 0.5% last month following a record jump of 1.3% the month before.

Price increases slowed despite a 6% surge in energy last month, which followed a 5.1% jump in January, the Labor Department said Friday.

Over the past year, wholesale prices are up 2.8%, the largest 12-month gain at the wholesale level in more than two years. Core inflation, which excludes volatile food and energy, rose 2.5% over the past 12 months.

Both readings are above the Federal Reserve’s 2% target for inflation. Some economists fear that inflation, which has been dormant over the past decade, could begin to rise under the extra demand generated by the government’s new $1.9 trillion stimulus package signed into law Thursday.

Others disagree, pointing out there are 9.5 million fewer jobs in the U.S. economy than there were before the pandemic hit a year ago, and argue that unemployment will keep a lid on inflation.

“While underlying price pressures will inevitably heat up amid a healthier, fiscally stimulated economy ... we believe inflation is unlikely to spiral out of control,” said Mahir Rasheed, a senior economist with Oxford Economics. “The Fed should therefore look through the transitory spike and stick to a very dovish policy.”

Fed policymakers meet next week and the expectation is that they will keep their benchmark policy rate unchanged at a record low of zero to 0.25%.