Inflation at the wholesale level surged in February, pushed higher by a big jump in energy prices and the largest increase in food costs in more than three years.Wholesale prices rose 1.3% last month, the biggest increase since November, the Labor Department reported Thursday. And even more worrisome, prices outside of the volatile food and energy sectors also showed a bigger-than expected increase of 0.4% last month. Toy prices rose at the fastest rate in more than two decades.
Separately, the Labor Department reported that the number of Americans filing claims for unemployment benefits dropped by 12,000 to 318,000 last week. It was the second consecutive weekly decline and a welcome development after big increases earlier in the year had raised concerns about the health of the labor market.
Financial markets have been roiled in recent days by worries that growing troubles with lenders who specialized in subprime mortgages — loans offered to people with weak credit or low incomes — could drag down the overall economy.
Investors were hoping that if the economic drag became bad enough, the Federal Reserve would start cutting interest rates to give the economy a boost. However, if the higher wholesale prices show up in rising retail prices paid by consumers, the Fed would be reluctant to cut interest rates for fear of fanning inflation.
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