"Raising our prices would probably have more of a negative impact" than any cost increases for the company, he says. "It's an investment on our part to keep customers loyal."

When Federal Reserve Chairman Alan Greenspan and his colleagues meet here today, recent economic reports showing an uptick in inflation will likely get close scrutiny. But a large number of economists, including those at Bear Stearns, Merrill Lynch and Bank of America, are cautioning that fears of runaway inflation are overblown. That means the Fed can continue its nearly 1-year-old campaign of slow-but-steady interest rate rises.

"There's no reason for them to look like they are panicking," RBC Dain Rauscher economist Vincent Boberski says.

Slowing economy

Even economists who think rates are probably too low argue that with the economy showing some signs of slowing, now is not the time for Fed officials to start raising rates at a rapid pace. Perhaps they should have started raising rates sooner or moved more rapidly sometime last year, says Bear Stearns senior economist Conrad DeQuadros.

Fed officials are expected to raise rates today by a quarter-percentage point for the eighth consecutive meeting. That will bring their target for short-term interest rates, which influence borrowing costs across the economy, to 3 percent, the highest since immediately following the Sept. 11 terrorist attacks in 2001. Rates are still low, historically speaking. As recently as 2000, when Fed officials were last faced with inflation fears, they brought their target to 6.5 percent.

Still, recent data and anecdotal reports have suggested cost pressures are building. The Fed's preferred inflation gauge, a measure of consumer spending excluding food and energy costs, rose 2.2 percent in the first quarter, the biggest rise since the last three months of 2001. A net 25 percent of small businesses raised prices in March, the biggest share since June, according to the National Federation of Independent Business. And a survey of consumers out last week showed inflation expectations at their highest in more than a decade.

But the economy appears to be losing steam from earlier in the year, which is lowering the risk of quick inflation. While growth may be slowing, competition is still extremely strong among businesses, which are competing in an increasingly global atmosphere. And slower-than-expected hiring has also meant that wage increases have been limited.

That makes it that much more difficult for shopkeepers and service providers to pass along all of their added costs to customers while continuing to ring up sales.

All about prices

John Cassidy, president of Duplicates INK, a commercial offset printer in Conway, S.C., has raised prices about 5 percent this year even though his costs are up far more. Chemical costs are up 10 percent, and his payments for health insurance for his employees have risen 30 percent for several years straight. But he figures that if he tried to recoup all of those added costs, his customers would just go to one of his many competitors.

"It all really does come down to price," he says.

Patrick Campbell, chief financial officer at 3M, said in a conference call with analysts last month that some customers appear to be waiting to see if price increases the firm enacted in the first quarter will stick. Others may have bought more in the fourth quarter to beat price increases at 3M, which makes a wide range of products from Post-it Notes to Scotch tape, Campbell said.

In a USA Today survey of 53 economists taken April 7-13, more than two-thirds said that although inflation was expected to rise this year, the gains would not be enough to be a "big worry" for the economy.

Nearly one-third said inflation would "remain contained," and only one economist said rising price pressures would be enough to cause "significant harm."

Although the survey was conducted before some government inflation data were released later in the month showing large price gains, economists interviewed since then said the new data did not change their opinions.