Wholesale prices in check

'Core' Producer Price Index unchanged in August; inflationary pressure below Street's expectations.

September 13, 2005: 9:07 AM EDT

NEW YORK (CNN/Money) - Energy costs drove wholesale prices higher in August, according to a government report issued Tuesday, but the report showed less inflationary pressure Wall Street expectations.

The Producer Price Index, which measures prices at the wholesale level, rose 0.6 percent in August, compared to a 1 percent increase in July. Economists surveyed by Briefing.com had forecast a 0.7 percent boost in August.

The so-called "core PPI," which excludes often-volatile food and energy costs, was unchanged in August, compared with a 0.4 percent gain in July. Economists had forecast the closely watched core number to be up only 0.1 percent.

The better-than-expected inflation reading could give hopes to those looking for the Federal Reserve to not raise rates when it meets Sept. 20, after 10 straight quarter-percentage point interest rate hikes.

Some economists have argued that with little inflationary pressure, the Fed should pause in its course of measured rate hikes to assess the impact of Hurricane Katrina on the economy. But oil and gasoline prices have hit record highs since the Aug. 29 storm, prices that were not measured in this report.

The Fed will also see the Sept. 15 Consumer Price Index report, the key measure of retail prices, before its meeting.

Bond prices rose, and the yield on the 10-year Treasury fell to 4.14 percent following the report.

Even before the post-Katrina energy spikes, the PPI report showed energy prices up 3.7 percent in the month. But food prices were off 0.6 percent. Passenger cars also were recorded as having a 1.3 percent decline in prices, as major U.S. auto manufacturers cut prices on 2005 models.