Americans to the Federal Reserve: Prices are too high!

Reuters) - On the streets of America, the debate over inflation is over. Prices are too high and rising too fast, many people say.

"The government says inflation is low, but that's not what I'm seeing at the grocery story," Jorge Alberto, an 88-year-old retiree in Miami, said walking out of a supermarket. "My pension is being put to the test."

Policy-makers at the U.S. Federal Reserve largely agree that promoting economic growth is still more urgent that constraining a nascent pick-up in consumer prices.

They look beyond the volatile fuel and food prices that have pushed up inflation and focus instead on data showing little if any upward rise in wages, something they would see as the seed of a sustained and broad-based rise in prices.

"I don't think the Federal Reserve has a clue about us little people," said J. McKeever, an instructor at the Montessori Institute of Milwaukee.

"I am very frugal, so I watch what I spend. And what I have noticed in recent months is that I have less money before than I used to, while making the same amount of money and having to pay for health care," she said.

Across the country, Americans tell of a disconnect between the real economy they live in and the macroeconomic picture as described by economic indicators.

Consumer prices rose 0.5 percent in February from January, and 2.1 percent over the previous year but the rates were half that when stripping out food and energy.

"There are no salary increases and you know you have the pressure at work to cut, but on a personal level everything else keeps going up. You never seem to be able to catch up," said Paty Peterson, 50, of suburban San Francisco.

Policy-makers at the Fed must weigh how much the perception of inflation might trigger actual price increases. The worry would be if businesses pushed up prices to cover their rising costs and workers in turn demanded higher wages to cover theirs -- which could spark a self-feeding cycle.

Consumers' inflation expectations rose briskly in March, according to the Thomson Reuters-University of Michigan survey.

U.S. households are facing higher prices for staple products such as Tide laundry detergent and Hershey chocolate bars as cocoa, sugar, oil, wheat, corn and other commodity prices climb.

Major consumer products makers have said in recent weeks that they will be raising prices........

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http://www.reuters.com/article/2011/04/07/us-usa-economy-inflation-idUSTRE7367BZ...