U.S. inflation at the producer level accelerated in March, but remained at a low level.

The producer-price index for finished goods rose 0.5% last month after rising by 0.1% in February, the Labor Department said Thursday. The increase reflected gains in food and energy prices, which rose by 1.5% and 0.6%, respectively. The closely watched “core” index, which excludes both food energy and food items, rose 0.2% after a 0.1% gain in February.

The numbers were exactly in line with Wall Street’s expectations.

Although the report showed that inflation climbed on a monthly basis, the report showed that inflationary pressures moderated in annual terms. In the 12 months that ended March, producer prices were up 1.4%, slowing from the 2.1% pace recorded in February.

“At first glance, these inflation readings appear to have soothed markets into agreeing with Federal Reserve Board chairman Alan Greenspan that signs of broadly rising inflation have yet to surface. However, a closer look at the PPI data suggests that pipeline inflation pressures continued to rise in March,” RBC Financial says.

Indeed, BMO Nesbitt Burns says that the 1.5% pop in food prices was a surprise. “There is no evidence yet that bubbling inflation upstream is fast flowing downstream to finished goods. But, it could only be a matter of time,” Nesbitt warns. “The Fed will debate the importance of this development, but Greenspan relegated it to less important than the currently ample slack in the economy during his testimony yesterday. Still, price pressures continue to heat up beneath the surface, slack or not.”

“Today’s data did not swing market expectations, but there remains no doubt that inflation and employment data hold the key to the timing of coming rate hikes,” RBC said.

In a separate release, the Labor Department said initial jobless claims fell by 9,000 to a seasonally adjusted level of 353,000 in the week that ended April 17. The four-week average, however, rose 2,250 to 347,000.

Economists had called for claims to fall by 20,000 to 340,000.