U.S. producer prices rose a greater-than-expected 0.4% in August according to the Produce Price Index released with morning.

BMO Nesbitt Burns says the underlying tone is that inflation poses little to no risk. The core rate was down 0.1%. Upward pressure came from vegetable prices, which jumped 15.9%.

Prices are 2.1% higher from year ago levels, up from 1.5% in July, but still among the smallest increases since mid-1999.

“There also appears to be no price pressures in the pipeline, as both total and core intermediate goods fell 0.4%, while crude goods dropped 2.3% in the month of August,” says CIBC World Markets. “Although energy prices may pose a risk in the coming months, given the uncertainty of how broad U.S. retaliation efforts may range, core prices are already waning on evidence of further U.S. economic weakness ahead.”

BMO Nesbitt Burns concludes, “Given the tragic events of this past week, the focus of this report should be on the underlying lack of inflationary pressure, which leaves the door wide open for the Fed to do whatever is required to support the financial system and the economy.”