There's some caution ahead of Greenspan. The market is looking for soothing words, such as growth is moderating and inflation is not a problem.

The Fed is keeping an eye on core inflation because they were concerned about prices spilling over from energy and commodities to the rest of the economy. This increases the odds that interest rate increases can remain measured, a quarter-point at a time.

If anything, this confirms the Fed's bias towards inflation rather than worrying about a slow down in growth. The Fed seems to have no worries about growth, as least as far as manufacturing is measured by ISM.

We expect the combination of solid economic growth and higher inflation risks to push the Fed to raise rates higher than is implied by prevailing bond yields.

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.

We got a little bit less growth and a little bit more inflation.