inflation's measured in varying ways.. there's types that includes volatile items like energy and food, and there's types that don't.
i agree with greenspan that inflation is definitely something to keep an eye on, but what's happened recently is not all that bad. in many respects, it should be seen as a huge relief that the deflationary pressures that existed in 2001-2002 have subsided. deflation is some scary stuff, as evidenced by japan.
and, inflation just dropped by a little recently:
http://money.cnn.com/2004/07/15/news.../ppi/index.htm
the latest increase was .2% if you exclude energy and food, and .3% if you include them. not much to worry about there.
it seems to me that the fed is waiting for inflation to gradually increase, and marry that up with gradual increases in interest rates. imo, the fed should not try to pre-empt rising inflation with interest rate increases. such action could be counter productive. i like the reactionary stance as far as the fed goes.. everytime they try to base monetary policy on expectations/predictions, the markets react oppositely and mess up what the fed tried to accomplish.