Alan Greenspan, on his last day on the job he has held for more than 18 years, presided over a Federal Reserve that raised the base interest rate again.

According to John Berry, a Bloomberg columnist: "The quarter-percentage point increase lifted the Fed's target for the overnight lending rate to 4.5 percent. That's very close to most officials' estimate of the so-called neutral level ? the rate at which monetary policy is neither stimulating nor restraining economic activity.

In June, 2004, when the lending rate target was only one percent, the Fed's strategy was to increase it slowly and steadily to keep core inflation under control without undermining the economic expansion. It is predicted that one or two more increases may be necessary to control concerns about rapidly rising oil prices.

In economic theory holds that inflation is an increase in the general level of prices of a given kind in a given currency. Inflation is measured by taking a "basket" of goods, and comparing the prices at two intervals, and adjusting for changes in the intrinsic basket. Thus, there are different measurements of inflation, depending on the basket of goods selected. The most common measures are of consumer inflation, producer inflation and price indexes ? which measures inflation in the entire economy.

General inflation is a fall in the purchasing power of money and a rise in the general level of prices within an economy, as compared to currency devaluation, which is the fall of the market value of a currency between economies. The extent to which these two indicators are related is open to fierce economic debate.

Inflation tends to breed a revolving cycle. Prices spiral upwards; people cannot control the cost of their daily living expenses and start to feel the pinch; wage demands push up the cost of salaries, which then escalates yet again the cost of goods and services. At some point, price resistance comes into play and consumers decrease their discretionary (and some fixed cost) spending. The economy then starts to slow down as demand for goods and services decrease because everyone feels just a bit poorer. As an economy slows and recessionary thinking comes into play, the monetary powers that be start analysis again of the wisdom of jumpstarting consumer confidence with interest rate cuts ? cheap money again on the horizon.

Bermuda has always appeared to be affected quite differently economically, from other countries. Like it or not, we seem to have permanently high inflation, much of it due to market forces beyond our control. In the past couple of years, however, not only have we seen the basic high cost of fuel filter down to everyday life, washing and dry cleaning, utilities, plane fare, transportation & shipping, but we have been hard hit by the currency triangle.

Our dollar is pegged to the US dollar. The currencies of Canada, the United Kingdom and "Euroland" have consistently strengthened against the US dollar during this time span. Goods and services that were traditionally cheaper than the US rose dramatically in price, more than 25 to 35 percent in some cases, as the US dollar value weakened. Lacking hedging resources in many cases, Bermuda merchants had no choice but to pass this increase on to the local customer. A triangular travesty for all.

It is also probably true that "Bermudian residents become so numb to the constant rise in the cost of everything that they don't even look at prices". In fact, the determining measure of whether they buy something or not generally breaks down to just how much do they really want the object, or service in question. Increasingly, though, I find myself more than slightly uncomfortable with the high cost of everything here and am reminded of just how difficult it has to be for the average family to put inexpensive nutritionally sound meals on the table, day after day. Not to mention all of the other things that growing children need.

The good news is that savings, fixed and term deposits, and new debt issues will carry higher yields. Everyone who chafed at the horrendously low savings rates for the last few years is feeling somewhat more cheerful, not up to the old seven percent for a five year fixed deposit, but at least a little bit above the real inflationary pressures here at home.

The bad news is that residents holding adjustable rate mortgages will see an interest rate increase as the cost of financing your home and your business just became a little dearer. Some mortgage holders do have adjustable principal and interest flexibility; that is to say, the monthly payment will remain the same, but the amount of the payment applied to mortgage principal reduction will be significantly less. Others will see an overall increase in the size of the mortgage payment itself. Check your original mortgage terms to see where yours fits.

Should you renegotiate your mortgage to lock in a fixed term rate? Perhaps now is the time to ask your mortgage officer to work the long-term cost of a fixed versus a variable rate mortgage.

How do you cope with the high cost of groceries, and other basic necessities? It is a challenge, no question, particularly with most of our workforce (couples and single parents) working full time long hours (not 35, to be sure) to provide the best for their families. And it sure isn't easy at the end of the day to prepare meals, nine nutritious delicious ways.

As is always the case, fresh food costs significantly more than dried pasta, rice, beans, bread, and other high carbohydrate products. Some protein products (hamburger, pork) imported from lower cost countries are still very reasonably priced, while local eggs, real milk, cottage cheese, regular (rat) cheese, non-fat large size yoghurt still pack a tremendous nutritional value per pound.

A small suggestion: start reading food labels. What are you buying? Is it real food packed with protein, fibre, complex carbohydrates, vitamins and good oil? Or is fluff food, high cost, refined, low nutritional content, full of sugar just waiting to hit your lips and onto your hips?

Would you like to find out (and to understand) what you are really getting with your hard earned food dollars? Stay tuned for a simple food favourite evaluator.