While inflation remains tame, inflationary pressures keep building. Thus, the Fed can't let its guard down.
While there is no room for complacency, the Fed can take comfort in the fact that core inflation remains tame, despite some modest inflationary pressures. Global Insight predicts that the Fed is near the end of its tightening cycle.
Once you take out the impact of Hurricane Katrina, demand for manufactured goods remains pretty robust. The underlying strength in the economy is still pretty good.
The Fed can take comfort in the fact that core inflation remains tame, despite some modest inflationary pressures - gradually rising wage inflation, tighter capacity constraints and higher oil prices.