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Originally published Sunday, July 27, 2008 at 12:00 AM

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Inflation slams lower-income Americans hardest

Unlike the inflation of the 1970s and 80s, today's surging prices have disproportionately hurt lower-income Americans. That's because inflation so...

Unlike the inflation of the 1970s and 80s, today's surging prices have disproportionately hurt lower-income Americans.

That's because inflation so far has been confined mainly to food and fuel. Such staples make up a bigger part of lower-income family budgets, so rising prices pack an extra wallop.

"When you separate people by their income level, what you find is that the highest income group has handled this level of inflation much more easily than the lowest income group," says Richard Curtin, director of the Reuters/University of Michigan surveys of consumers.

To be sure, upper-income households, those making more than $75,000 annually, are complaining about inflation, too, according to the consumer-sentiment survey, but not as big a percentage as lower-income households.

In 1980, a nearly identical percentage of upper-income and lower-income households said rising prices were affecting their financial situations.

Since then, the gap has widened, with the survey recording its biggest disparity late last year. Curtin says that's partly because of the rising income gap between poor and wealthy households.

"For more than a decade, income has grown for the highly educated and highly skilled, whereas for the majority, incomes have stagnated," he says.

Consumer prices for food and beverages rose 5 percent in May from the prior year, while energy showed 17.4 percent inflation, according to the U.S. Bureau of Labor Statistics.

But after stripping those items out, the so-called "core" Consumer Price Index rose just 2.3 percent.

Some economists think the Federal Reserve may raise interest rates later this year to prevent inflation for food and fuel from boosting core inflation.

Copyright © 2008 The Seattle Times Company

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