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The Willis Report

Wake Up and Smell the Inflation

Fed Chairman Ben Bernanke says there is no threat of inflation. He calls the bad economic news we've seen recently "headwinds.

But as usual - the numbers tell a different story. A key measure of wholesale inflation rose last month by the most in six months. Not counting the always volatile food and energy prices - core inflation surged a half a percent in July alone.

Overall prices- including energy and food - rose a quarter of a percent in July. That's a result of food costs rising by the most since February.

Higher wholesale prices tend to raise pressure on department and grocery stores and restaurants to pass along those higher costs to consumers. Great, just what we need.

The biggest factor actually in today's report is tobacco. Prices jumped nearly 3% - the largest increase in more than two years.

Many economists agree with Bernanke, saying they aren't concerned about the increase in prices. They say it's a temporary spike.

Really, temporary? Over the past year - overall prices have jumped more than 7%. That's the biggest rise in two and a half years. That doesn't feel temporary to me!

And this problem won't be short-term if the Fed doesn't wake up and smell the inflation. The Feds policies are contributing to higher inflation - keeping the short-term interest rate at nearly zero since December of 2008.

Just last week they announced it will stay that way until 2013! So basically the Fed is saying we're going to keep things at the status quo! As long as inflation stays below the 2% mark month-to-month - we're fine!

I don't want to sit around and wait for a 2% increase - with stagnant wages and high unemployment the slightest increases can do major damage.

It's time Bernanke and company face reality.

Maybe they should go shopping with some parents for back-to-school supplies and see if the "slight" increase in prices matters to them.

Be sure to catch the Willis Report on the FOX Business Network every weekday from 5-6pm ET.

Gerri Willis is the host of "The Willis Report" (5PM/ET), a primetime program that covers the leading financial and political stories of the day and their impact on consumers. Click here to see more from Gerri Willis.