But many people don't seem to be canceling plans, especially those who love the water.

A study by the Recreational Marine Research Center shows 94 percent of boaters will be out this summer, even if fuel prices rise another dollar a gallon.

But like other travelers, the mariners say they'll try to save fuel and cut back in other ways. Only 25 percent say they'll reduce their boating time.

"It doesn't say, 'Yes, the Fed must tighten.' But it doesn't assure them the luxury of a pause," William Sullivan, chief economist at JVB Financial Group in Boca Raton, Florida, said of the core prices data.

"Against that backdrop we have to sit back and await more information on inflation and the economy," he said.

In addition, expectations of inflation five years out rose to 3.2 percent, matching October's post-hurricane reading in a troubling sign for Fed policy-makers.

The report on April prices from the Commerce Department showed overall prices up a steep 0.5 percent, with inflation once again eroding gains in personal income.

But Fed officials and financial markets focus more on core price gauges. On that count, the government data were mixed.

Over the past 12 months, the core price index for consumer spending accelerated to a 2.1 percent gain from the 2 percent rise in the period through March. It was the largest 12-month increase since March 2005 and just outside the Fed's perceived "comfort zone" for inflation.

Still, traders in financial markets breathed a sign of relief that the data, which followed a surprisingly strong reading in the popular core consumer price index, did not show even more inflation pressure.

Prices for both stocks and government bonds were up modestly in late morning trade. However, the dollar, which initially weakened on inflation relief, also gained.

The Fed has raised interest rates in 16 straight meetings since mid-2004, taking benchmark overnight borrowing costs to an even 5 percent, and has warned that credit might have to be tightened further given inflation risks.

TOUGH CALL

Both reports on Friday underscored the tough call Fed officials are facing in considering whether to push interest rates higher. Inflation pressures appear somewhat elevated, but signs of cooler economic growth ahead are emerging.

In a letter to a lawmaker released on Thursday, Fed Chairman Ben Bernanke said the central bank had to be forward-looking. But he also said it could only keep inflation expectations low by showing a commitment to stable prices.

The Commerce Department said consumer spending rose a solid 0.6 percent in April on the back of a 0.5 percent March gain. But after the bite from inflation, spending was up just 0.1 percent for a second straight month.

Personal income rose 0.5 percent, the same as in March, but after inflation and taxes, income was down 0.1 percent.

"Even if real spending rebounds by 0.3 percent in both May and June, the quarter as a whole will see spending up just 2.4 percent," said Ian Shepherdson of High Frequency Economics. That would be less than half of the first quarter's pace.

While more hard-earned dollars going to pay for gasoline, Americans continued to tap savings to make purchases.

The personal saving rate -- saving as a percentage of disposal income -- fell to negative 1.6 percent in April, the 11th straight monthly negative reading.

Economists said lofty gasoline prices continued to damp consumer sentiment in May and could lead them to cut spending.

"The decline in consumer sentiment in the month of May is likely to weigh heavily against consumer spending in May, and for the second quarter as a whole," said Brian Bethune, U.S. economist at Global Insight in Lexington, Massachusetts.