If you think inflation is under control you are a fool, its going to get alot worse than this and should continue to increase greatly over the next 12-18 months...lets see them drop rates to 2% now.... ECONOMIC REPORT Energy, food push January's PPI 1% higher Year-over-year increase highest since 1981; monthly core PPI up 0.4% By Greg Robb, MarketWatch Last update: 9:21 a.m. EST Feb. 26, 2008 PrintPrint EmailE-mail Subscribe to RSSRSS DisableDisable Live Quotes WASHINGTON (MarketWatch) -- Producer prices soared in January, pushed higher by energy prices and the biggest increase in food prices in more than three years, government data showed Tuesday. The producer price index climbed by 1% last month, the Labor Department reported. The closely followed PPI, which measures the rate of inflation at the wholesale level, had fallen 0.3% in December after having registered a jump of 2.6% in November. January's core PPI, which excludes food and energy prices, rose 0.4%, driven by higher drug and car prices. Year over year, the PPI is up 7.4% -- the fastest pace since 1981. Also on an annualized basis, the core PPI is up 2.3%. Economists surveyed by MarketWatch had been looking for the PPI to rise by 0.4%, although some expected much larger gains. They also forecast a 0.3% rise in the core PPI. See Economic Calendar. The high prices at the wholesale level will add to concern that the nation's economic slowdown is doing little to ease inflationary pressures, with implications for the Federal Reserve and monetary policy. Fed chief Ben Bernanke will discuss the inflation statistics on Wednesday when he delivers his monetary policy report to Congress. "It will be hard for Mr. Bernanke to testify...and hold to the fiction of inflation as under control and the Fed as master of tamed inflation expectations," said Robert Brusca, chief economist at FAO Economics. The January consumer price index, released last week, also showed a broad increase in costs. See full story. That report stirred fears among some economists that the economy could be returning to the stagflation of the late 1970s. Stagflation is shorthand for sluggish growth coinciding with high prices. The data will provide ammunition to Fed hawks, some of whom have argued recently that the central bank has already cut interest rates enough over the past six months. Richard Fisher, president of the Federal Reserve Bank of Dallas, dissented from the last half-percentage point rate cut made in late January. He said in a speech last week that rising energy and food prices were being driven by demand for better-quality food coming from new consumers in India and China and thus was outside the Fed's control. See full story. Fitting with this picture, prices for corn and wheat at the crude, or unprocessed, level rose sharply. "While recent data have certainly been cause for concern, we do not believe that sustained higher core inflation will prove to be a problem in the coming year, particularly at the more important consumer price level, as U.S. growth slows to well below trend and consumer spending weakens. However, monetary policymakers will certainly be looking over their shoulders at the inflation bogeyman until expectations of moderation turn into reality," said Josh Shapiro, chief U.S. economist at MFR Inc. Details prove worrisome Energy prices rebounded 1.5% in January after having fallen 3% in December and having jumped 11.4% in November. Gasoline prices rose 2.9% last month, while wholesale prices for home heating oil climbed 8.5%. Food prices surged 1.7%, marking the fastest pace since October 2004. January's prices for car and light truck both rose 0.3%, with wholesale prices for drug preparations having increased 1.5%. Book publishing costs rose 1.7% in February, which is the fastest pace since March 2002. The inflation picture was also worrisome further back in the production pipeline. Prices of intermediate goods destined for further processing rose 1.4%, with core intermediate goods prices moving up 1.0%. In the past year, the core intermediate PPI is up 4.1%, the fastest pace since December 2006. Prices of crude materials rose 2.5% in January, coming on the heels of a 1.1% gain in December.