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BOB MOON: This was a day of bad flashbacks from the 1970s -- for a group you don't normally associate with bad flashbacks: Economists.

No, it wasn't pet rocks or disco music that set them off. It was two scary sets of numbers. First, wholesale inflation for 2007 -- those are the prices at the farm and factory gates -- shot up by the largest amount in 26 years. Second, retail sales fell in December, closing out the weakest year at the cash register since 2002. Put it together -- high inflation plus a slowing economy -- and it could equal stagflation. Marketplace's Jill Barshay looks into whether that scourge of the '70s might be coming back.

JILL BARSHAY: When the economy wobbles, it's usually inflation or recession doing the shaking. Inflation usually hits when the economy is booming. High demand for goods pushes prices up. When recession bites, the opposite happens. Demand drops off and companies lower prices to move product out the door. But when high prices and a recession coincide, that's stagflation.

PETER KRETZMER: More and more people are starting to say, well, do we have a stagflation problem? We're certainly closer than we have been in a long time.

Peter Kretzmer is a senior economist at Bank of America. He says prices are being driven higher by the rising cost of oil. But at the same time, the economy is slowing and more people are losing their jobs.

Kretzmer: What could be more important, "Do I have a job? And what's the cost of the goods and services I'm buying?" If both of those things are going in the wrong direction, obviously, that's a problem for consumers.

It's an even bigger problem for policymakers. Central bankers haven't got much in the way of weaponry. They can adjust interest rates or pump money into the economy.

Richard Sylla is an economic and financial historian at New York University. He says the Fed is caught between a rock and a hard place.

Sylla: If it prints a lot of money to keep the economy from sinking into recession, then all that money is likely to put upward pressure on prices. If the Fed decides that it's worried more about inflation than economic weakness, well, then it doesn't create so much more money and the economy then slips into recession.

Both Sylla and Kretzmer say the Fed is making the recession enemy number one. There's talk about the Fed cutting interest rates by a half-point this month. But when the economic slowdown is over, they say, we'll likely be paying more for everything.

In New York, I'm Jill Barshay for Marketplace.