WASHINGTON (Reuters) - Producer prices retreated in May as the cost of energy plunged, buying the Federal Reserve some time to maintain its ultra-low interest rate policy.
The Labor Department on said on Wednesday its producer price index, which measures costs at the wholesale level, fell 0.3 percent last month. Analysts polled by Reuters had been looking for a 0.5 percent drop.
Gasoline costs tumbled 7.0 percent.
Compared to a year earlier, prices rose 5.3 percent overall. But the core reading excluding food and energy climbed just 1.3 percent, slightly above forecasts but still near the lower bound of the U.S. central bank's presumed comfort range.
In response to the most severe financial crisis in generations, the Fed not only brought interest rates down to effectively zero but also created a number of emergency lending programs to help hobbled banks. Some economists worry that the vast expansion of Fed credit to the banking system could spark future inflation.
So far, however, there was little evidence that such a spike is imminent, with a debt crisis in Europe and concerns about the BP oil spill in the Gulf of Mexico keeping financial markets under pressure and knocking down oil and commodity costs.
(Reporting by Pedro Nicolaci da Costa, Editing by Chizu Nomiyama)