(Agencies)
Updated: 2007-12-20 23:56

That pickup suggested that high energy prices are pushing up the prices of other goods and services. High energy prices are a double-edged sword. They can put a damper on growth and also stoke inflation, which would be a dangerous combination for the economy.

The situation could complicate the Fed's job of trying to keep the economy growing, while making sure that inflation is under control. The central bank's bracing tonic for weakening economic growth is lowering its key interest rate, while the remedy for inflation is raising its key rate.

One of the reasons Bernanke and his colleagues opted to slice the Fed's key rate by just one-quarter percentage point on Dec. 11 was because of concerns about a possible inflation flare up. The modest cut disappointed Wall Street, which wanted a bolder, half-point rate reduction. That investor disappointment caused stocks to tumble.

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