Slow growth and inflation have a tendency to accompany large deficits and increasing debt as a percentage of GDP.

Despite low unemployment, wage growth remains contained. With job gains slowing, the risks from wage inflation appear to be receding. Interest rates will remain on hold in 2006.

In terms of economic growth, PIMCO originated the famous phrase the 'new normal.'

When gross public debt exceeds 90 percent of GDP, economic growth tends to decline considerably.

Concerns, however, remain on the level of the national debt, inflation and lack of investment.

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.