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) -- The Producers Price Index, which measures the rate of inflation at the wholesale level, rose 0.4% in September, after rising 0.4% in August and 0.2% in July, the Labor Department reported on Thursday.

The rate of increase was higher than the 0.2% analysts were expecting, according to consensus estimates from

But the core rate of inflation -- which excludes volatile food and energy prices -- remained steady at 0.1%, suggesting inflation levels were still under check.

On Friday, the Commerce Department will release the Consumer Price Index. The Index is expected to rise 0.2% while the core rate remains unchanged again at 0.1%.

At a policy meeting last month, the

Federal Reserve

signaled that it considers current inflation levels to be too low. Low inflation expectations could spark off a deflationary spiral at worst, while, at the very least, it curtails growth in real incomes and curbs spending.

The central bank's preferred measure of inflation is the Personal Consumption Expenditure Index, which is released along with the personal income and spending data at the beginning of each month.

However, with both the jobless claims number increasing and the inflation rate remaining benign, market expectations of further quantitative easing continue to mount.

Stocks were slightly lower following the release of weak economic data. The


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was down 0.3%, while the

PowerShares QQQ


was lower by 0.2%.

-- Written by Shanthi Venkataraman in New York

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Shanthi Venkataraman


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