In such an atmosphere of price pressures, reminiscent of 1978, the seemingly riskiest move the Federal Reserve could make would be to further reduce interest rates, making money cheaper to borrow. But numerous economists looking ahead believe the central bank will do exactly that at its next scheduled meeting Oct. 31, to head off any possibility of a recession and to quell global financial turmoil.

The debate over interest rates and the fear of inflation bring together two of the most fundamental factors that both dictate the course of economic growth and reflect it. Getting the balance right between nurturing growth through lower rates and warding off inflation by throttling back the growth of the money supply has always been a primary mission of the Fed.

"The Fed wouldn't cut rates in the current inflationary environment unless the very fabric of the expansion was at stake," said economist Scott Anderson of Wells Fargo & Co.

Friday's reports offered a bit of evidence to support either argument. The greenback fell to a record low against the euro for a seventh straight day Friday, as it depreciated to $1.42 per euro. But a government report showed core consumer prices in this country last month had only a tiny gain.

Despite the inflationary warning signs, the Fed did the right thing by cutting rates on Sept. 18, said Chicago economist William Hummer.

The central bank reduced its benchmark overnight lending rate by a half-point, to 4.75 percent. It also reduced its discount rate, at which it lends directly to banks.

"There were concerns about the global banking system, and the Fed saw that it must guard against any hint of disarray. Its first priority is to guarantee stability," said Hummer, of Wayne Hummer Investments.

The argument for lower rates stems from a global credit squeeze that created a freeze-up in major categories of loans. It was brought on by investors' refusal to buy certain types of high-risk debt. In particular, they began shunning anything related to the mortgage market, especially loans from the subprime sector, made to borrowers who are poor credit risks.

For now, Americans are largely ignoring inflation, especially when it comes to gasoline prices, said investment adviser Paul Nolte.

"We can see that people aren't cutting back on driving, as miles driven are holding steady," said Nolte, of Hinsdale Associates. "If they mention inflation, it us usually a complaint about high medical costs. And if there is a breaking point for oil prices, we still haven't reached it."

As the economy continues to bump along, Nolte sees no need for the Fed to cut rates at its next meeting.

"Members of the Fed will sit back and watch," he said. "Data about the economy isn't terrible, aside from housing, and consumers continue to spend."