Wholesale prices jump 1.7 percent in October

WASHINGTON - Wholesale prices - catapulted by more expensive energy and food - soared last month by the largest amount in more than 14 years.

With inflation at the producer level accelerating sharply after months of good behavior, chances are rising the Federal Reserve will boost interest rates for a fifth time this year on Dec. 14.

The Producer Price Index, which measures the costs of goods before they reach store shelves, jumped by 1.7 percent in October, compared with a tiny 0.1 percent in September, the Labor Department reported Tuesday. The increase was the largest since January 1990.

Wholesale gasoline and home heating oil prices were up by 17 percent for the month.

"A period of pretty tranquil inflation has passed - with a vengeance," said economist Ken Mayland, president of ClearView Economics.

On Wall Street, the report helped to push stocks lower. The Dow Jones industrials lost 62.59 points to close at 10,487.65. It was the Dow's largest single-session drop since Oct. 22.

Wanting to make sure inflation doesn't become a threat to the economy, Chairman Alan Greenspan and his Federal Reserve colleagues embarked on a campaign in June to raise short-term interest rates from what had been extraordinarily low levels to more normal ones.

Tuesday's price report reinforced Fed policy-makers' conviction that they need to raise rates "before anything bad happens," said Bill Cheney, chief economist at John Hancock Financial Services.