Economic Update

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Wholesale prices rose in February, as another hefty increase in energy costs offset falling food prices. Outside of food and energy, prices shot up at the fastest pace in 15 months.

Outside of food and energy, the rise in inflation was 0.5 percent, the biggest increase for core inflation since November 2006.

The hefty February increase in core inflation raises concerns that relentless increases in energy costs are beginning to spread to other areas of the economy.

That could act as a constraint on the Federal Reserve, which is trying to combat a serious economic slowdown by cutting interest rates to jump-start economic growth.

However, if inflation starts to be a problem, the Fed could be caught in the grips of stagflation, the malady of stagnant growth occurring at the same time that inflation is rising.

For the moment, Fed officials have said they view the threat of a recession as the bigger problem.



 
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