WASHINGTON - Prices paid to U.S. producers rose 1.7 percent last month, the biggest increase in 14 years, as higher energy and food costs suggested that inflation is picking up.

The increase in wholesale prices followed a 0.1 percent gain in September, the Labor Department reported. The core rate, which excludes food and energy, rose 0.3 percent for a second straight month. Energy costs rose 6.8 percent, the most since February last year.

The Producer Price Index numbers boosted expectations that Federal Reserve policy-makers will raise interest rates next month to help stem inflation. Producer prices are rising at a 5.2 percent annual rate this year, up from a 4.7 percent increase at the corresponding time last year.

"Inflation is trending up, and the message to the Fed is that they probably need to push rates up a bit from what are extraordinarily low levels," said economist James O'Sullivan of UBS Securities LLC in Stamford, Conn., who correctly forecast the rise in core prices.

The increases might be short-lived because crude oil prices have retreated about 15 percent since peaking Oct. 25 at $55.67 a barrel in New York futures trading. The 1.6 percent surge in food prices also might be temporary, in the wake of September's hurricanes in Florida, economists said.

"Monthly numbers tend to bounce around quite a bit, so it could feed through into the core in one month or even several months, but the question is whether it's going to affect long-term expectations," Michael H. Moskow, president of the Federal Reserve Bank of Chicago, said yesterday. "Rising energy prices have not appeared to affect long-term inflation expectations."

The rise in energy prices last month followed a 0.9 percent drop in September. Heating oil costs rose 17.9 percent, and the price of electricity increased 2.3 percent, the most since January 1991. Gasoline prices surged 17.3 percent, the biggest rise since June 2000.

Prices of raw materials, called crude goods, rose 4.3 percent last month after a 4.2 percent decline in September. Prices of partially finished goods increased 0.9 percent after rising 0.1 percent.

Wholesale prices rose 4.4 percent last month after an increase of 3.3 percent in September. The core index is 1.8 percent higher than it was in October of last year, after a 1.9 percent rise in September.

Prices for capital equipment rose 0.4 percent for a second month, led by a 2.7 percent surge in costs of construction equipment, which was the biggest since January 1980 and might have reflected the effects of rebuilding after the hurricanes. Computer prices fell 0.3 percent last month.

Passenger car prices dropped 1.3 percent after an increase of 1.1 percent in September. Prices of light trucks rose 2.7 percent, the most in a year.

Fed policy-makers are sanguine about the effect on the economy from last month's rise in fuel costs.

"Output appears to be growing at a moderate pace despite the rise in energy prices, and labor market conditions have improved," the central bankers said last week as they raised the target for the benchmark overnight bank lending rate a quarter of a percentage point, to 2 percent.

The Fed is likely to raise the rate a quarter-point for a fifth time this year during its last 2004 meeting on Dec. 14. That would take it to 2.25 percent, economists said.

John Ryding, chief U.S. economist at Bear Stearns & Co. in New York, said the producer price report does take the Fed "closer to raising rates again on Dec. 14."

Commentary: