Stagflation?

The U.S. faces an unwelcome combination of looming recession and persistent inflation that is reviving angst about stagflation, a condition not seen since the 1970s...

A simultaneous rise in unemployment and inflation poses a dilemma for Fed Chairman Ben Bernanke. When the Fed wants to fight unemployment, it lowers interest rates. When it wants to damp inflation, it raises them. It's impossible to do both at the same time...

That credibility could be endangered by the Fed's recent track record. Yesterday's forecasts show that FOMC members define price stability as inflation of 1.5% to 2%, measured by an index that differs slightly from the commonly cited consumer-price index. By that measure, inflation has averaged 2.8% since mid-2004, when oil began a multiyear surge. Core inflation, which excludes food and energy, has averaged 2.2%...

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I think inflation is a much bigger concern than a recession at this point.