By CHRISTOPHER S. RUGABER
AP Economics Writer
WASHINGTON (AP) — Wholesale prices rose less than expected in October as the weak economy keeps inflation pressures largely in check.
Federal Reserve Chairman Ben Bernanke said Monday that inflation probably will remain “subdued for some time.” That allows the central bank to keep the short-term interest rate it controls at its record low of nearly zero.
The Labor Department said Tuesday that its Producer Price Index rose 0.3 percent last month, after falling 0.6 percent in September. Analysts had expected a 0.5 percent gain, according to Thomson Reuters.
The index tracks the prices of goods before they reach store shelves and is considered an early read of price trends.
In the 12 months ending in October, producer prices fell 1.9 percent, the 11th straight decline.
Excluding volatile food and energy costs, the core index dropped 0.6 percent in October.
In the past year, the core index rose 0.7 percent, the smallest increase in more than five years.
High unemployment helps keep a lid on labor costs, which enables companies to hold prices down. The unemployment rate jumped to 10.2 percent in October, a 26-year high.
Food prices last month rose 1.6 percent, driven by a 24.2 percent jump in vegetable prices, the most in two years. Egg, fruit and milk costs also rose.
Energy costs also increased 1.6 percent, as gas prices rose 1.9 percent. Oil prices rose as high as $81 per barrel in October before finishing the month at about $77, up from about $70 in September.
The 1.9 percent annual drop in producer prices compared with a 4.8 percent decline in September. The 6.8 percent drop in July was the largest on records dating to 1947. Those declines reflected lower oil prices compared with last summer, when oil reached a record $147 a barrel.
Falling auto prices helped hold down the core index last month. Light truck prices dropped 5.2 percent, the most in three years, while passenger car prices fell 0.5 percent.
The government will report consumer prices on Wednesday. Economists surveyed by Thomson Reuters are forecasting a modest increase of 0.2 percent, partially from higher gas prices. Excluding food and energy, consumer prices are expected to grow 0.1 percent.
The expectation of low inflation gives the Fed leeway to hold rates low for an “extended period,” Bernanke said Monday, repeating a pledge made at the central bank’s meeting earlier this month.
Economists expect the Fed will hold rates near zero at its next meeting on Dec. 15-16 and into part of next year to help the recovery gain traction.