WASHINGTON - WHOLESALE prices sank in November for the fourth month in a row, raising fresh fears that they'll keep on dropping and lead to a dangerous bout of deflation.

The Producer Price Index, which tracks costs of goods before they reach consumers, fell 2.2 per cent last month as prices for gasoline and other energy prices retreated, the Labour Department reported on Friday.

That followed a record 2.8 per cent plunge in wholesale prices in October. Smaller price declined were logged in August and September.

November's price drop was larger than the 2 per cent decline economists were forecasting.

Falling prices might sound like a gift at first - at least for buyers. But a prolonged, widespread decline would do serious economic damage, dragging down incomes, clobbering home prices even more and shrinking corporate profits.

Stripping out energy and food prices, which can swing widely from month to month, the 'core' rate of inflation nudged up 0.1 per cent in November. That matched economists' expectations.

Core inflation, which had gone up a brisk 0.4 per cent in the prior three months, has calmed down considerably.

With the US economy sinking deeper into recession, the Federal Reserve is widely expected to slice its key interest rate - now at 1 per cent - by at least half a percentage point on Dec 16.

Lower rates are aimed at enticing consumers and businesses to boost spending, which would spur economic activity.

In November, energy prices fell 11.2 per cent, following an even bigger 12.8 per cent drop in October. That reflected a record 25.7 perc ent plunge in gasoline prices, as well as sharp declines in the costs of home heating oil and liquefied petroleum gas, such as propane.

Food prices, meanwhile, were flat in November, after edging down 0.2 per cent in October. Falling prices for pork and eggs helped to temper rising prices for beef and veal, and vegetables.

Elsewhere in the report, prices for passenger cars dropped 0.6 per cent and prices for light trucks dipped 0.1 per cent in November. -- AP