updated 1/13/2006 8:48:24 AM ET 2006-01-13T13:48:24

Soaring gasoline costs pushed inflation at the wholesale level up sharply in December, ending a year in which wholesale inflation rose at the fastest pace since 1990.

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The Labor Department reported that its Producer Price Index, which measures price pressures before they reach the consumer, rose 0.9 percent in December, the biggest increase since a 1.7 percent jump in September. The culprit in both months was a big surge in gasoline costs, which spiked above $3 per gallon in early September, reflecting lost Gulf Coast production following Hurricane Katrina.

For all of 2005, wholesale prices rose by 5.4 percent. That was the biggest increase since a 5.7 percent increase in 1990, and another year in which surging oil costs pushed inflation higher. However, core inflation, excluding energy and food, was up a more moderate 1.7 percent in 2005, including a tiny 0.1 percent increase in December.

The 0.9 percent increase in wholesale prices in December followed a 0.7 percent plunge in prices in November. Economists had been expecting a rebound last month but the increase was more than double the 0.4 percent rise they had been predicting.

The increase was expected to keep the Federal Reserve on a path of gradually moving interest rates higher to make sure that energy price pressures do not spill over into more broad-based inflation problems.

Analysts believe the Fed will boost a key interest rate for a 14th time when officials next meet on Jan. 31, which will be Alan Greenspan’s last meeting as chairman. Another quarter-point hike is expected in March at the first meeting where Ben Bernanke will preside as chairman.

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