UPDATE 1-PIMCO's Gross questions U.S. inflation assumptions

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NEW YORK, May 22 (Reuters) - Americans are fooling themselves if they think U.S. inflation is under control, the manager of the world's largest bond fund said on Thursday.

Bill Gross, chief investment officer of Pacific Investment Management Co (PIMCO) said in his June investment outlook that he has been arguing for some time that inflation statistics "were not reflecting reality at the checkout counter."

He said statistical practices in calculating price growth had favored lower U.S. inflation over the last 25 years and called for change.

"Today's world, including its inflation rate, is changing. Being fooled some of the time is no sin, but being fooled all of the time is intolerable," Gross said.

"Join me in lobbying for change in U.S. leadership, the attitude of its citizenry, and (to the point of this Outlook) the market's assumption of low relative U.S. inflation in comparison to our global competitors."

The comments from Gross come a day after the Federal Reserve slashed its 2008 U.S. economic growth forecast but also signaled that mounting concerns over inflation would make further interest rate cuts unlikely.

Gross said that developing economies such as Brazil, Russia, India and China were obvious choices for investment dollars.

U.S. Treasury bonds were not favored investments due to negative real yields, Gross said. He added that Treasury Inflation Protected Securities (TIPS) were difficult to value because of the "artificially low inflation number" arising from statistical quirks. (Reporting by Burton Frierson; Editing by Tom Hals)