WASHINGTON U.S. producer prices increased more than expected in September amid higher costs for energy products, but underlying inflation pressures at the factory gate continued to moderate.

The producer price index for final demand rose 0.5% last month, the Labor Department said on Wednesday. Data for August was unrevised to show the PPI accelerating 0.7%.

Economists polled by Reuters had expected the PPI to gain 0.3%. In the 12 months through September, the PPI increased 2.2% after advancing 2.0% in August.

The narrower measure of PPI, which strips out food, energy and trade services components, gained 0.2% after rising by the same margin in August. In the 12 months through September, the so-called core PPI increased 2.8% after climbing 2.9% in August.

The report was published ahead of the release on Thursday of September's consumer price data, which is being closely watched for clues on whether the Federal Reserve will raise or keep interest rates unchanged against the backdrop of rising U.S. Treasury yields and conflict in the Middle East.

The economy continues to forge ahead despite hefty rate hikes, creating 336,000 jobs in September, the most in eight months and almost double the amount economists had expected in a Reuters survey. Financial markets overwhelmingly anticipate the U.S. central bank will leave rates unchanged at its Oct. 31-Nov. 1 policy meeting, according to CME Group's FedWatch tool

Top ranking Fed officials indicated on Monday that soaring yields on long-term U.S. government bonds could steer the central bank from further rate hikes. Since March 2022, the Fed has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)