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) -- Prices at the wholesale level rose less than expected in October, the Labor Department said on Tuesday.

The Producer Price Index for Finished Goods, or PPI, increased 0.4%, after rising by a similar rate in August and September. Economists were expecting PPI to rise by 0.8%, according to consensus estimates from


Prices for finished energy goods rose 3.7%. More than 90% of the October rise can be attributed to the index for gasoline, which moved up 9.8%, according to the report.

In October, prices for finished consumer foods edged down 0.1 percent after increasing 1.2 percent in September. A majority of this decrease can be traced to the index for fresh and dry vegetables, which declined 8.1 percent.

Excluding volatile food and energy prices, PPI actually dropped 0.6%, the first drop in the core index in 2010.

The decrease in prices could help reinforce the Fed's fears that inflation levels are dangerously low.


Federal Reserve

embarked on a second round of quantitative easing last week, in a bid to boost growth but also ward off the threat of deflation.

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Markets have, however, been skeptical of the effectiveness of the Fed's latest move and have been concerned that inflation would rise to uncontrollable levels. Treasuries have been selling off and yields have been climbing as bond investors bet against the Fed.

Investors will be watching out for the Consumer Price Index report that will release tomorrow. The consensus is for prices at the consumer level to have risen 0.3% and at 0.1% at the core level excluding food and energy.

The Personal Consumption Expenditure Index, the Fed's preferred measure of inflation, will be released next week.

-- Written by Shanthi Venkataraman in New York

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