I think the market has got too pessimistic on interest rates,

is still hoping to squeeze one more interest rate cut in.

The broad picture shows the economy is growing at much the same pace in the third as the second quarter,

We would expect the Fed to say something about Katrina and what it means for the immediate and long-term impact on activity and I think there's a lot of uncertainty about what they may say.

The risk is that the deficit is rather worse than the market is looking for and if that's the case it may swing the focus back to structural dollar negatives and away from the interest rate focus.

Even if these (falls) reverse partially next month, this is very bad news on domestic demand.