The Federal Reserve, meeting tomorrow and Thursday, is in a bit of an interest-rate bind.
It's expected to keep short-term rates unchanged again, but some experts feel the Fed may have to inflict a little more pain on consumers and businesses and bump rates up another quarter-point or so in order to keep a lid on inflation.
Curtailing inflation is, or at least should be, the top priority for the Fed. We can't afford to revisit the bad old days of double-digit inflation, and we really can't afford for consumer prices to rise much more rapidly than they already are.
As it is, high gasoline prices are taking too much money out of our wallets, and prices of some foods (notably milk and dairy products) are spiraling, too.
The Fed has to give us some more bitter medicine - whether it's raising rates or simply holding the line and delaying the rate cut many consumers want - even though there's some risk of a slowdown, or even a recession.
Avoiding recession is always tricky business. And by historical standards, we're long overdue for one. There have been 10 since World War II, according to the National Bureau of Economic Research. They have occurred an average of 63 months apart and last an average of 10 months.
Our last two recessions lasted 8 to 9 months each. The most recent one started in March, 2001, and ended the following November. The one before that started in July, 1990, and ended in March, 1991.
Right now, some experts put the chances of a recession within the next year at 50-50.
Friday, the International Monetary Fund reported that U.S. growth is very slow, just 2 percent for 2007, and is at the level where the economy stalled in the past and began the nosedive into recession.
However, the IMF sees the economy pulling out this time and heading for a "soft landing" next year, with a somewhat improved growth rate of 2.7 percent.
Recessions are always painful, producing higher unemployment, layoffs, lower corporate profits, and often a bear market on Wall Street.
But there usually is a lot of gain from the pain.
For example, in 1990, the inflation rate was more than 6 percent, but by the end of 1991, after the recession, it was cut in half, at 3 percent.
In the 2001 recession, consumer prices were frozen, or actually dropped a little, during four months, and by the end of 2001, inflation stood at 1.6 percent annually, versus 3.4 percent the year before.
The prime interest rate was 10 percent through almost all of 1990, but by the end of the recession in early 1991 it was a full percentage point lower, and within a year after the recession it had fallen to 6.5 percent.
In 2001, the prime rate was around 8 percent at the start of the recession, but fell to 5 percent by the end, and a year later was down to just over 4 percent.
In the recession of 1990 and 91, U.S. average gasoline prices fell more than 20 percent from their peak, and in the 2001 recession, gas prices dropped more than 30 percent.
Reduced demand for petroleum products might be especially beneficial to the economy now.
The high price of gasoline has benefited the growth of alternative fuels such as ethanol, but that, in turn, has raised the price of corn, a primary feed for livestock.
So, to fight inflation in fuel prices, we essentially have created inflation in food prices.
The Fed has limited choices. Whatever it does is likely to hurt many consumers and businesses.
But if the Fed fails to keep a lid on inflation, we're all going to be hurting for a long, long time.