Specter of stagflation returns to haunt U.S. economy

American consumer prices rose sharply last month and oil prices hit a record above $100 a barrel Wednesday, fueling inflationary pressures that could complicate efforts to steer the U.S. economy away from recession.

Despite a weakening economy that many analysts, including the Federal Reserve chairman, Ben Benanke, say should put a damper on inflation, prices have kept rising at a worrisome pace. Over the past three months, inflation has risen at an annual rate of nearly 7 percent, more than double the pace in the previous three months, the U.S. Labor Department said Wednesday.

Fueling the increase are energy costs, which have soared at a 44 percent annual rate since November, according to the department.

"We've got a rock-and-a-hard-place problem if inflation is setting in," said Larry Chorn, chief economist at Platts, a publisher of energy market information.

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