NEW YORK ( TheStreet) -- Prices at the consumer level rose more than expected in December, as higher crude oil and food prices ate into household purchases.

The Consumer Price Index for all urban consumers rose 0.5%, a tenth higher than the 0.4% economists were expecting, according to Over the last 12 months, the all items index increased 1.5 percent before seasonal adjustment.

Energy prices led the rise. Seasonally adjusted energy prices rose 4.6%. Gasoline prices jumped 8.5%. Food prices were also higher by a tenth of a point.

Adjusting for volatile food and energy prices, the core rate of inflation edged up 0.1% in line with expectations. The price index was reined in by unchanged prices for new vehicles and declining prices of used cars and trucks, recreation, communication and household furnishings.

On Thursday, the Labor Department said the producer price index for finished goods rose 1.1% after rising 0.8% in November.

Subdued levels of inflation has helped justify the Federal Reserve's$600 billion quantitative easing program. Critics have said the Fed cannot afford to ignore the rising prices of food and energy, which make up a chunk of American household spending.

But Ian Shepherdson of High Frequency Economics says inflation at the consumer level is nothing to worry about for now. According to him, so long as wages do not rise, which is unlikely in the near term given the high unemployment rate, inflation is not a cause for concern.

Consumers will continue to buy food and energy at higher prices, but will cut back on other non-essential items, keeping the overall price pressures muted. That said, it could hurt spending.

"The Fed will be more concerned about the potential negative effect on real spending of higher food and energy prices than any inflation risks," Shepherdson wrote in his daily note on the U.S. economy. "If the economy were running hot with 4% unemployment rate, things would be different, but it is not."

-- Written by Shanthi Bharatwaj in New York

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