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Inflation stepped up a notch in December, at least at the wholesale level, as the Labor Department, just moments ago, reported that the Producer Price Index had climbed by 0.4% last month. That increase compared with a decline of 0.1% in November, but was in line with expectations.

However, if we look at the so-called core rate of producer price growth, we learn that such inflation--which backs out the volatile food and energy components--increased by 0.3% last month, three times the 0.1% gain the previous month and also three times the scant increase that had been forecast for December. That was a slightly unsettling result for those few who are fretting about a return of inflation, but not a material change in course, we sense.

Contributing to the faster rate of price growth last month were sharp gains in gasoline, heating oil, and tobacco. Also, rising last month, but in more muted fashion, were prices for passenger cars, capital goods, and pharmaceuticals. Food prices fell sharply, meanwhile declining by 0.6%, the biggest drop since September.

It should be noted, though, that much of the increase in core prices, which as noted came to 0.3% last month, was due to surging costs for tobacco. Such increases often are temporary in nature, so there seems to be little on that score to be concerned with at this time.

Meanwhile, the headline PPI rise of 0.4% was the largest uptick in this aggregate sector since last June when wholesale prices had risen by 0.6%. That earlier uptick was generated largely by a 2.5% gain in energy prices. The rise in energy costs was a less-onerous 1.6% in December. Still, this latest result represented the largest upswing in energy prices since last June, and it was the third biggest uptick in that category in 2013.

Looked at for the entire year, wholesale prices advanced by just 1.2%. Moreover, the rate of gain for the core PPI was only 1.4%. Clearly, inflationary pressures remain muted, suggesting that any further monetary tapering by the Fed, and we think there will be an additional paring of the rate of asset purchases when the central bank's FOMC meets late this month, will go on as scheduled.

Overall, this was an acceptable report, and should ease some concerns about disinflation, or even deflation, that some pundits fear could be ahead. We do not subscribe to the possibility of such an unwelcome turn of events, and do believe that the latest PPI report was sufficiently benign to keep the Fed on its present monetary tightening course.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.