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TEXT OF INTERVIEW

KAI RYSSDAL: The '70s are coming back according to some experts -- not fashion experts thankfully, economic experts. We're not talking pet rocks and lava lamps here. We're talking about 1970s-style stagflation, that not-so-groovy convergence of inflation with economic stagnation. David Wyes is the chief economist for Standard and Poor's. David, inflation we get, rising prices and all that, but stagnation?

DAVID WYES: Stagnation means or what it meant at least back in the '70s and '80s was a period of extremely slow growth. In per capita terms, growth then was running about one percent a year. It's a far cry from today when it's up about two and a half percent a year.

RYSSDAL: And in fact, you know in the last quarter it was up way more than that. So where's all this stagflation talk coming from?

WYES: Well, I think it's coming because people are trying to look at a convenient label for this. And there are people who do expect the economy to slow down, including us. We just don't think it's going to slow down all that much to qualify as stagnation in a meaningful sense.

RYSSDAL: Do you think we have perhaps a little bit of a self-fulfilling prophecy here? If we have all these economists, and no offense intended, but if we have some economists anyway running around wringing their hands and saying 'Oh my goodness, stagflation, stagflation . . .' Isn't everybody sort of going to start thinking that that's really what's happening?

WYES: Well I think that's the worry, that people start thinking about stagflation and suddenly start pulling in their horns, trying to take their money home and stop investing. Most economists aren't saying this however. Let's face it. It's a small minority who are really talking about stagflation. Although an increasing number are starting to talk about the worries of inflation.

RYSSDAL: How important is the control of inflation in an economy that's otherwise kind of humming along?

WYES: Well frankly control of inflation is critical in the long run, because if it gets out of control then that's going to put upward pressure on bond yields, on interest rates and is going to bring the economy down. The trick to keeping the economy going is to make sure it doesn't go so fast that it creates too much overheating. It's sort of like running a car, you know. At some point you run the engine too fast for too long, the car breaks down.

RYSSDAL: Are we using the right measurements as we think about stagflation and whether or not it's really there?

WYES: Well I think we are using the right measurements -- that's what it means: stagnant economy, high inflation. We're really not seeing very high inflation. It's still below the historical average. Growth is still hanging in at a very solid level. And the unemployment rate, which is after all the major worry for most Americans, remains very low. This is a different economy than it was 30 years ago in many respects. For better or worse what we do depends much more on what happens overseas than it did 30 years ago.

RYSSDAL: Do you think Ben Bernanke's actually worried about stagflation?

WYES: I think Ben Bernanke is worried about inflation. I don't think he's terribly worried about stagnation. Everything the Fed has said is that 'Yeah, the economy's cooling a bit, but growth remains solid.'

RYSSDAL: So how long do you think it's going to take for all this talk of stagflation to sort of disappear?

WYES: Well I think it'll disappear when the Federal Reserve clearly stops raising interest rates. And my guess is we've got two more rate hikes to go.

RYSSDAL: Two?

WYES: I think you'll see one next week almost certainly. And my guess is we get one more after that, that'll get us to five and a half percent. I think the Fed then will have to reverse course next year.

RYSSDAL: David Wyes at Standard and Poor's in New York. Mr. Wyes thanks a lot for your time.

WYES: Thank you Kai.