I think it's a bygone conclusion that they will raise rates in January, but there's also debate about whether they'll raise rates in March.
It was almost a sure bet that the Fed was going to raise rates in June. Now it's almost a sure bet, say 50-50 at least, that they won't move in June.
It's a reasonably accepted conclusion that the Fed will raise rates in both June and August; that's what the market has discounted. I don't know if Friday's employment report will change that, no matter what it says.
It's very clear that higher energy prices are now being passed along to consumers, and it's not difficult to do that when the economy is as strong as it is. This will put additional pressure on the Federal Reserve to continue to raise short-term interest rates.
I don't think it changes anything for Federal Reserve policy. Various early warning signs of inflation are still telling us they have to raise interest rates by 50 basis points and they are likely to do so when they meet next week.
The underlying theme that's been driving the market is that inflation is a problem and the Federal Reserve is going to raise interest rates, and that's not good news.
The combination of a decline in oil prices, however slight, and some fairly upbeat comments (by Fed officials), may have led Fed watchers to conclude the Fed may raise interest rates at its meeting in May, and then stop.
The market is worried that the Federal Reserve will continue to raise interest rates well into 2006 and possibly make a policy mistake. If you look at housing starts they're very strong. Everyone knows the unemployment rate is low and the Fed is uncomfortable with that.