Warning that Deflation Poses Threat to Recovery Creates Waves.

By Michael E. Kanell, The Atlanta Journal-Constitution Knight Ridder/Tribune Business News

May 10--Deflation was the buzz this week, but as the noise began to fade, many economists were left shaking their heads.

The Federal Reserve sparked the talk by reversing a half-century policy of targeting inflation as its principal enemy in the struggle to shape and spur the economy. Instead, the Fed signaled on Tuesday that falling prices are a threat to recovery.

Deflation is dangerous because it could shove an already-wobbly economy into a recession that would be hard to reverse.

But the Fed's caution left economists shaking their heads.

"The idea that we are looking at a general deflation is wrong," said economist George Von Furstenberg of Indiana University, who worked for Fed Chairman Alan Greenspan in the Council of Economic Advisers.

"There simply is no indication in the data of deflation. That is not the …