The focus of concern over the U.S. economy has shifted dramatically. A few months ago, economists in government and industry insisted that inflation was the major danger, arguing that a flare-up in prices could bring an end to the long expansion. Now, analysts fear that worldwide financial turmoil, which started in Asia and has spread elsewhere, could imperil prosperity at home and invite massive social unrest overseas.

Economists feel economic policy must shift toward stimulating growth. Inflation can no longer be seen as the nation's primary near-term worry. As a result, interest rates worldwide are likely to decline, including some moves by the Fed to ease U.S. monetary policy.

The fight against global inflation has dominated policy for 30 years. Economists believed that rapid inflation was the root cause of a recession. They have not abandoned this belief, but circumstances are different now. Inflation has been under control in the United States and in other countries for years. If anything, there is more concern about deflation than a burst in prices.

The balance of risks has shifted toward stimulating worldwide economic growth. With a quarter of the world's population living in countries with declining or negative growth, the imperative is to spur these economies. It's clear that the United States isn't immune from world economic events. The U.S. economic outlook has grown uncertain over recent weeks with the plunge in the stock market, weakening export sales for many firms and declining corporate profit levels. As Fed Chairman Alan Greenspan noted, the United States can't remain an oasis of prosperity in a world in economic stress.

Confidence of consumers and businesses has helped sustain economic growth. But turmoil on Wall Street and other markets could shake that confidence. Just as a bull stock market feels unending and secure in a strong economy, when markets contract the recovery feels inconceivable. Both views are wrong, but because it is difficult to imagine a turnaround as emotions take hold, such periods tend to feed on themselves.

There is evidence that business activity is slowing. Consumer spending has turned softer since recent stock declines. Orders and production have also slowed as export industries have cut back. Facing lower profits, corporations are reducing capital investment outlays. Firms are concentrating on preventing an inventory build-up to trim costs.

Inflation continues at a moderate pace and is not likely to revive. The slowdown in world economies makes a new outbreak of inflation unlikely, and interest rates are at low levels, encouraging continued growth. In short, analysts don't look for recession in the United States anytime soon. But that doesn't mean it can ignore the rest of the world. The crisis that started in Asia has spread to other countries, particularly to those in Latin America, Russia and some less-developed countries.

There are questions whether lowering rates will accomplish the task. Lower interest rates are a blunt instrument for coping with the panicky psychology that has taken hold recently among international investors. According to analysts, this may not be enough to get capital flowing into the emerging markets.

Administration officials keep pressing Japan to stimulate its economy. Japan, which holds the key to Asia, promises actions to boost its economy. But it has yet to make clear any details about and speed with which new policies would be implemented.

The stock market slide could cut the expected federal budget surplus. The Congressional Budget Office predicted a $1.5-trillion, 10-year surplus, based partially on a prolonged stock-market boom. With the market decline, revenues may fall and with it the budget surplus. A 25% stock drop could cut the surplus by at least $20 billion each year. And this could happen even with a U.S. economy that continues to advance.

In other news, accord has been reached to ease a potential Y2K computer crisis. A bipartisan group in the Senate, the Administration and industry firms have come together on compromise legislation. As outlined by the Senate, the legislation would grant businesses limited protection from lawsuits if they share information about fixing Y2K computer problems. But the bill would still allow liability suits over computers, software and other products that don't work as of the year 2000.

Firms are fearful of Y2K lawsuits spawned by financial losses from malfunctioning computers, broken contracts and product liability caused by computer incompatibility. While not stopping these lawsuits based on Y2K computer failures, the bill would make it easier for firms to hold candid conversations with their important suppliers, telephone, power and other service companies.