Producer prices rose by the most in three years in August as the cost of energy surged, a government report showed on Thursday, but underlying inflation pressures were contained.
The Labor Department said its seasonally adjusted producer price index increased 1.7 percent last month, the largest gain since June 2009 and accelerating from July's 0.3 percent rise.
Economists polled by Reuters had expected prices at farms, factories and refineries to rise 1.1 percent last month.
Wholesale prices excluding volatile food and energy costs rose 0.2 percent, slowing from a 0.4 percent increase in July. The rise matched economists' expectations.
Despite the rise in overall wholesale inflation last month, there is likely to be little pass-through to consumers given sluggish job growth and tepid domestic demand.
Consumer inflation is currently below the Federal Reserve's 2 percent target. Officials from the U.S. central bank were meeting for a second day on Thursday to deliberate on policy.
The Fed is expected to announce the launch of a third round of the bond purchases at the end of the meeting, to spur the lackluster economic recovery.
The Fed decision, which could also include tweaks to its pledge to hold rates near zero at least through late-2014, is expected around 12:30 p.m. EDT (1630 GMT)
Overall producer prices last month were buoyed by a 6.4 percent increase in energy prices, the biggest rise in three years.
Energy prices, which were pushed up by a jump in the cost of gasoline, accounted for more than 80 percent of the rise in wholesale prices last month. Energy prices had dropped 0.4 percent in July.
Food prices rose 0.9 percent, the largest gain since November. Higher prices for dairy products accounted for a third of the increase in food prices last month. Food prices had increased 0.5 percent the prior month and could remain elevated as a severe drought pushes up the cost of grain and soybeans.
In the 12 months to August, producer prices increased 2.0 percent, biggest gain since March, after advancing 0.5 percent in July.
Outside food and energy, producer prices were restrained by a decline in the cost of passenger cars, which fell 0.2 percent after rising 1.1 percent in July. Light motor truck price increases slowed to 0.6 percent after a advancing 1.6 percent the prior month.
Pharmaceutical product prices increased 0.5 percent, accounting for more than 30 percent of the rise in core PPI last month.
In the 12 months to August, core producer prices increased 2.5 percent after rising by the same margin the previous month.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)