The precise August increase, before rounding, was 0.4692082, which if maintained and compounded for 12 months would produce annual inflation of 5.8 percent.

The increase or decrease in any particular item not only does not, but cannot, produce inflation.

"That should produce inflation that is higher than the Fed wants."

They say the Carter programs helped produce the economic overheating and double-digit inflation of the late 1970's.

Back in the bad old 1970's, temporary supply shocks tended to produce higher inflation automatically.

"We don't know yet if the economy will even be strong enough to produce inflation in those years," Mr. Fine said.

If the urban rate continued at the same pace for 12 months, it would produce annual inflation of 3.5 percent on a compounded basis.

Bond prices also fell sharply, reacting to the possibility that the overheating economy could produce higher inflation.

But an economy that is too strong would produce inflation and higher interest rates, which is counterproductive to corporate profits.

He ordered the printing of more money to pay off potential strikers, thus producing higher deficits and inflation.