NEW YORK (CNNMoney.com) -- Inflation is the itch that the Federal Reserve just can't seem to scratch.

The Fed has slashed interest rates numerous times since last September to try to get the economy out of this severe funk. But so far, the most notable consequences of the rate cuts are a drastically weakened dollar and surging commodity prices.

The Labor Department reported Tuesday that its Producer Price Index, which measures wholesale prices, jumped 1.1% in March, the second biggest gain in the past 33 years and much higher than forecasts.

The so-called "core" PPI number, which excludes food and energy prices, rose a more modest 0.2%, in line with expectations.

But is that really supposed to soothe consumers? Oil prices hit a new record high Tuesday, as did the prices per gallon of gas and diesel fuel.

In the past twelve months, sugar prices are up 27%. Corn prices have surged 67% and wheat prices have shot up 73%.

The argument that economists should look more at "core" inflation has to ring hollow with consumers who are taking a big financial bite every time they go food shopping and fill up their car's gas tank.

"This is just another data point in the crescendo of negative news we've been getting for the past couple of months," said John Derrick, director of research for U.S. Global Investors, a money management firm.

"Energy and food price increases continue to be the main story," he added. "The higher cost of energy is not just affecting Americans through the price of a gallon of gas, it's affecting the cost to put food on their table."

We'll find out Wednesday just how much of these increased costs are being passed on to you and me when the Labor Department reports its Consumer Price Index.

Economists expect a 0.3% increase in the overall CPI and 0.2% bump in the core number. But one has to think that the overall number will be higher than forecast based on Tuesday's PPI figure.

The weak dollar and resulting surge in commodity prices have the Federal Reserve concerned. That's why more big rate cuts from the Fed might not be the best way to address the economic weakness.

"Think of the fed funds rate as a monetary spigot, and the Fed's goal is keeping the lawn of the economy green and healthy," said Dallas Federal Reserve president Richard Fisher (our favorite Fed official and father of the world's best Tom Cruise impersonator) in a speech in San Antonio last week.

"If we turn the spigot up too forcefully, we will flood and kill the grass with inflation. If we provide too little, the lawn turns brown, starved for money," Fisher explained.

Fisher went on to say that because of the credit crunch, rate cuts have not yet helped to stimulate more borrowing. He blamed "the shadow banking system," referring to a term dubbed by Pimco managing director Paul McCulley last year to describe unregulated securities created by many investment banks.

Fisher said credit problems have made investment banks look like "a Rube Goldberg device designed by a hydrologist on acid, with pipes and conduits that lead every which way and not always toward the goal of sustainable economic growth." (Imagine Ben Bernanke using that metaphor.)

For this reason, he added that "even as we have been cutting the fed funds rate, even as we have been opening the monetary spigot, interest rates for private sector borrowers have not fallen correspondingly, and rates for some borrowers have increased. The grass is turning brown."

In other words, the rate cuts have not substantially helped and more big rate reductions might not either. Instead, they may simply lead to a further weakening of the dollar and more inflation.

These words shouldn't come as a big surprise since Fisher is the Fed's resident inflation hawk. He voted against the three-quarter point rate cut in March as well as the half-point cut on Jan. 30. (He was not a voting member of the Fed's policy-making committee last year.)

But other Fed members who were on board with these big rate cuts are starting to express more worries as well.

"We also need to be alert to risks to price stability," said Fed governor Kevin Warsh in a speech in New York Monday. "Increases in food and energy prices have pushed up overall consumer prices and are putting upward pressure on core inflation and inflation expectations. We will continue to monitor the inflation situation closely."

Warsh has voted in favor of all of the Fed's six rate cuts since last September.

And Philadelphia Federal Reserve president Charles Plosser joined Fisher in voting against the three-quarter point cut in March.

According to the minutes of that meeting, released last week, Plosser indicated that the Fed "could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures."

Plosser will be speaking Wednesday at Montgomery County College in Blue Bell, Pa., about the near-term prospects of the economy. It will be interesting to see if he elaborates further on his inflation concerns.

Because if oil at $113 a barrel isn't "clear evidence that inflation expectations were no longer anchored," I don't know what is.

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