WASHINGTON (AP) -- Inflation at the wholesale level soared in January by the fastest pace in 16 years pushed higher by costs for food energy and medicine.

The Labor Department said Tuesday that wholesale prices rose 1% last month more than double the 0.4% increase that economists had been expecting.

The worse-than-expected performance was certain to capture attention at the Federal Reserve which has chosen to combat a threatened recession by aggressively cutting interest rates in the belief that weaker economic growth will keep a lid on prices.

But the combination of rising inflation and weaker growth raises the threat of "stagflation" the economic malady that plagued the country through the 1970s when a series of oil shocks left households battered by the twin problems of stagnant growth and rising prices.

Core wholesale inflation which excludes food and energy posted a 0.4% increase the biggest increase in 11 months. This gain was led by a 1.5% spike in the cost of prescription and non-prescription drugs.

The 1% jump in wholesale prices followed a 0.3% decline in December and was the biggest one-month increase since a 2.6% gain in November. That gain had been driven by sharply higher energy costs.

With the January jump wholesale prices have risen over the past 12 months by 7.5% the fastest increase since the fall of 1981 when the country was in a deep recession.

The big jump in wholesale prices followed a worse-than-expected increase in consumer prices which rose by 0.4% last month as consumers got hit by higher costs in the same areas of food energy and health care.

The wholesale report said energy prices jumped 1.5% reflecting a 2.9% rise in gasoline and an even bigger 8.5% jump in the cost of home heating oil.

Food prices which have been surging because of increased demand stemming from ethanol production rose by 1.7% last month the biggest monthly increase in three years. Prices for beef bakery products and eggs were all up sharply.