DEFLATION IS A MORE REALISTIC WORRY:

Inflation? Numbers Show Faith in Fed (MARK GONGLOFF, 4/29/11, WSJ)

"You would think, by watching TV or listening to people ranting, that inflation expectations are out of control," said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. "But clearly they are well-contained."

Inflation is rising, driven by higher oil and food prices. On Thursday, the Commerce Department reported that the personal consumption expenditure price index, the Fed's favored inflation gauge, rose at a 3.8% annual rate in the first quarter, the biggest increase since the third quarter of 2008.
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But looking beyond the next year, inflation worries are surprisingly muted and have actually fallen slightly in recent weeks.

Long-term inflation-expectation gauges, from consumers and from the bond market, remain subdued and are little changed from a year ago. They point to inflation that isn't far above the average of the past decade, when inflation was historically low.

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