An ounce of inflation

IF you've suspected the prices on those cuts of meat and chicken at the supermarket have been creeping up of late, you're right. A jump in food prices -- mainly meat -- made up the biggest part of the modest 0.2 increase in the consumer price index for August. While the inflation news was very good indeed, it did carry a somewhat hidden message. The good news is that inflation in general continues low -- a 2.2 percent compounded annual rate. Compare that with those double-digit rates of the late 1970s and early '80s! But tucked within the data is some slightly discouraging news on the food front.

Economists say hand-wringing is hardly called for. Food prices will likely moderate in the weeks ahead, now that the drought in the Southeast has eased and food production is returning to normal. And on overall inflation, this week's Labor Department data ought to look upbeat to Wall Street. Inflation is expected to remain low. It may rise in the months ahead -- the White House's Beryl Sprinkel says it will ``ooze up'' somewhat -- but it is still projected to come in at modest levels.

The inflation front must be closely monitored. There can be no return to the type of spiraling rates that marked the last decade. At the same time, the Federal Reserve Board has room to stimulate the economy, as needed, by encouraging cheaper credit. The Fed's monetary policy has not been too stimulative. Economic growth continues, though sluggishly. If the Fed must lean, it should do so toward the side of stimulation -- keeping the expansion going -- rather than toward overcaution out of fear of inflation. An ounce of inflation does not merit a pound of monetary restriction.