Wednesday's report of a larger-than-expected increase in the January consumer price index sparked talk of an inflation "scare" compounding the recession "scare" already on investors' minds.
Competing evidence of higher inflation, the worst in at least two years, and possibly the first recession in seven years creates a quandary for everyone from Federal Reserve policymakers to ordinary investors.
If the Fed keeps cutting interest rates, as expected, won't inflation pressures build? If the Fed fights inflation by being less aggressive in its rate cuts, won't the sluggish economy get worse?
If investors hedging against inflation bid up commodity prices and shares of food and energy producers, won't the purchasing power of an overall portfolio be eroded by surrendering to inflation?
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