Wholesale prices in the US surged ahead in May, rising 0.9%, adding to concerns over continuing inflation risks and stoking fears over further rate rises.
Petrol prices jumped in May
The increase in factory gate prices were mainly driven by a 10.2% rise in petrol prices.
But excluding volatile food and energy prices, core inflation was up a more moderate 0.2%, figures from the US Labor Department showed.
The data sent US government bond yields back up to near five-year highs.
The benchmark US Treasury 10-year bond yield rose to 5.23% after the US report was released, continuing their recent upward trend.
But analysts said the surprise rise in wholesale prices did not change their view on the inflation outlook, comforted by the fact that core prices were broadly unchanged.
"The headline number was bigger-than-expected, but that will be watered down in some sense because we know what gas has done," said Jim Paulsen, chief investment officer at Wells Capital Management.
"It would take a core number coming in greater-than-expected to get people really excited about inflation."
Consumer prices, out on Friday, will be closely watched by the market to see whether retailers have passed on rising factory gate prices to consumers.