My take is that the Fed will continue to raise overnight rates until it feels it has moved from a stimulative to a neutral policy stance. That will likely take the funds rate to 4 per cent-to-4.25 per cent by yearend.

Starts at year-end 2003 will provide additional support for GDP during the first two quarters of 2004 as construction activity gradually brings these buildings to completion,

This report will not change the Fed's view on the inflation outlook -- they will keep rates low for still some months to come,

Bearing in mind that the Fed wants higher inflation, the news is not unwelcome. And the market will remain firmly in the camp that the Fed will not tighten soon, ... Nevertheless, the risks from the PPI are easy to see and look real in light of the big decline of the dollar and rise in import costs that preceded them.

This all but seals the deal on a coming cessation in Fed tightening,

The markets are assuming that the Fed are finished tightening for the year, ... That presumption might prove to be premature. We, and the Fed, will wait and see.