US producer prices rose more than expected in September as the cost of petrol surged, but underlying inflation pressures were muted in a sign the US Federal Reserve has room to carry out its new monetary stimulus program.

The Labor Department said today its seasonally adjusted Producer Price Index increased 1.1 per cent last month.

Economists polled by Reuters had expected prices at farms, factories and refineries to rise 0.7 per cent after climbing 1.7 per cent in August.

Despite the rise in overall wholesale prices last month, there is likely to be little pass-through to consumers given sluggish job growth, which puts a brake on inflation.

Wholesale prices excluding volatile food and energy were flat last month. That was the lowest reading since October 2011 and fell short of analysts' forecasts.

Consumer inflation is currently below the Federal Reserve's 2 per cent target, and many economists think it will trend below that level for years to come.

In a bid to boost economic activity, the Fed launched an aggressive new stimulus program last month, pledging to buy $40 billion of mortgage-backed debt a month until the outlook for jobs improves substantially.

Overall producer prices last month were buoyed by a 4.7 per cent increase in energy prices. Higher fuel costs drove the increase. Wholesale diesel prices also contributed, rising 9.2 per cent, the biggest one-month gain since December 2010.

"These kinds of energy prices are debilitating to the economy and it is one of the reasons why we haven't been able to get any kind of a glide speed above a 2 per cent annual rate," said Cary Leahey, an economist at Decision Economics in New York.

Following the release of the data, prices for US 30-year Treasuries hit a session high as traders bet the core price reading signalled a muted trend in inflation. US stock futures were higher after robust earnings from JP Morgan.

Food prices rose 0.2 per cent, backing off of the faster pace of price increases seen over the summer when a severe drought pushed up the cost of grain and soybeans.

In the 12 months to September, producer prices increased 2.1 per cent, biggest gain since March, after advancing 2 per cent in August.

Outside food and energy, producer prices were restrained by a decline in the cost of communication equipment.

Core producer prices increased 2.3 per cent in the 12 months to September.

Reuters