I don't think the market is terribly worried about inflation but there is an expectation that corporate profits might just struggle a little more.

That low inflation rate leaves the Fed plenty of latitude to remain on hold, and reinforces our expectation that [a rate increase] is unlikely before the third quarter of 2004.

There are going to be major demands for wage increases and thus causing further inflation.

You have to be positive on 10-year bonds when you expect lower inflation. I don't expect the Bank of Canada to raise rates at its next meeting because inflation is low and going lower.

The signal is that if we have good growth in 2006 but no inflation, there is no need to raise rates. I would even say, one more hike (this year), but not necessarily at the next announcement.

A low inflation number is positive for bonds. It is possible that most of the tightening could be done.