The discrepancy is caused by how the government calculates inflation. They use something called consumer price index or CPI to measure how the price of things have increased over time. I will spare you the details and just say they fudge their numbers in variety of ways to make their official inflation statistic look good (3-4% annually). They do this in several different ways. One is by calculating inflation by taking the CPI and excluding volatile economic variables like real estate prices and student loans. There are other methods they use to lower their calculation of CPI and inflation but I won't get into that here, you can Google that on your own time if you wish. In a nutshell, the government understates their inflation statistic to look reasonable so that savers do not get spooked. A crude analogy to explain this would be that of a student that is allowed to write his own falsified report card to show his parents. In a similar way, the government writes their own report card when it comes to inflation.

The reason why inflation is not noticed by the majority of the population can be explained by the fact that it is not uniform across the board. While the price of groceries may have appreciated a small amount, everyone will acknowledge that housing prices or student loans have mooned over the past few decades. If the government inflation statistic of 3%/year is to be believed one must do mental gymnastics or adhere to contrived explanations to make sense of it.