Inflation, energy, home prices, and tax rebates.

 
Ordinary Americans and Wall Street professionals are at odds on issues like these and others at the center of the current economic malaise, according to the CNBC/Portfolio Wealth in America survey. And these differences have implications for both the Federal Reserve and this year's congressional and presidential candidates.
 
For example, while Wall Street forecasters predict inflation will be fairly tame in the next year, at about 2.5 percent, 71 percent of the report’s respondents think prices will rise by at least 4 percent, and 50 percent expect inflation to run at or above 6 percent.
 
In the past month, the Federal Reserve has been trying to put a lid on inflation expectations, culminating last week with what was seen as a benign outlook for price pressures in the statement following its monetary policy meeting.
 
Still, Americans don't seem to be hearing that message.
 
On energy prices, many economists on both sides of the ideological divide believe higher demand has been the primary driver of the recent run-up in prices. But Americans think otherwise. Twenty-eight percent blame oil companies, 26 percent point the finger at President Bush, and 23 percent believe speculators are at fault.
 
Sentiments like this will surely bode well for Democrats come November, as party members in the Senate have tried to increase taxes on oil-company profits and House Democrats last week pushed forward legislation which would have the Commodity Futures Trading Commission using its emergency powers to curb speculation in energy markets.
 
As for home prices, futures traders see nationwide values falling into 2010, but only 23 percent of Americans share that view. That's not to say homeowners haven't turned pessimistic during the current housing-market collapse--in February, 20 percent of respondents thought housing prices would go down--but the results stand in stark contrast to recent data showing home prices in April fell by the largest amount on record.

But Americans’ seemingly optimistic view on the prices their own homes will fetch doesn’t reflect market realities, says Lehman Brothers economist Michael Hanson.
 
"The vast majority of Americans aren't actually in the market,” Hanson says, and that likely leads them to be "more backward-looking and more hopeful rather than facing the reality that demand is soft."
 
And on tax rebates, recent consumer-spending data suggests that a sizable chunk of the $107 billion stimulus package is being spent, but only 9 percent of respondents said they had used their rebates to make purchases.

The surprisingly strong spending numbers led Richard Berner, the chief U.S. economist at Morgan Stanley, to admit that the results "suggest that tax rebates are probably lifting consumer spending sooner and by more than I’ve expected."
 
And this appears to be a repeat of the last round of tax rebates in 2001. Back then, many Americans also said they would save or pay down debt with their stimulus checks. However, recent research has shown that consumers actually wound up spending up to two-thirds of those rebates.

This might be the one piece of good news in the survey for Republicans: If the rebates help the economy avoid a deep recession, Republican candidates can use their early support for the stimulus to highlight their economic know-how.
 
So which side is the correct one on these issues: the average American or the number-crunching pro? Even though it’s too early to tell, in the end it probably won’t even matter. As the Fed’s anti-inflation campaign illustrates, it’s often perception that can lead to reality. (Take our poll and let us know where you have felt the squeeze.)