The market has been nervous for days about inflationary rumblings and the possibility that the Fed might give the economy some tough medicine. And things started to look a little worse Friday when the government released new figures showing the core rate of inflation was 0.2 percent, reports Reuters.

The core rate is the one the Fed looks at because it ignores food and energy. Gasoline has been particularly volatile in recent months and that has made the real cost of living rise even faster. The total rate of inflation (with food and gas in) was 0.5 percent and that just about wiped out all gains in personal income.

And if May comes in negative for savings, that will make a year we’ve been in the red on national savings. That’s not really sustainable.

The Fed will keep studying the charts to try and divine whether this is a blip in a strong economy or whether we’re starting to see something like the price spirals of the 1970s. If the central bank sees signs of the bad old days, they’ll definitely start giving us a spoonful or two of that tough medicine. And if they give us too much of that medicine, we could be looking at a recession.