Economists said the report provided further evidence that inflation, while still edging up, posed little immediate threat to the business expansion.

They also signaled further rate cuts were ahead, saying excessive economic weakness rather than inflation posed the pre-eminent risk to the economy in coming months.

Double-digit inflation and the growth in the costs of public policy at a rate faster than that of the economy posed obvious problems.

But the economy has improved every month, he said, and now it is strong enough that inflation poses a threat in 1997.

THERE is also little agreement about the threat that inflation poses to the economy and the markets.

High inflation, and the gradual disintegration of the economy, clearly pose a new threat to Mr. Milosevic.

Investors are certainly aware that higher inflation and interest rates pose threats.

The results marked the first increase in energy prices since May, but that reassured analysts that inflation posed little threat.

Not everyone agrees that inflation poses a greater threat than the trade imbalance.

The question on economists' minds is whether inflation has indeed jumped into a higher range or only poses a potential threat.