ALAN GREENSPAN famously described the failure of long-term interest rates to rise in tandem with the increases he is engineering in short-term rates as a conundrum, a puzzle. The Fed chairman might with even greater accuracy describe the situation in which he now finds himself as a quandary, a state of extreme perplexity.

Start with the contradictory nature of the information about the state of the economy. Last week the government reported that the producer price index jumped 1 percent in July, and that even after volatile oil and food prices have been stripped out, the core index rose a surprising 0.4 percent. Surely that is an indication that inflation is taking off, that high oil prices are finally seeping into the prices of other goods, and that interest rates should be raised.