This summer's hurricanes served as a trigger point to start slightly slower economic growth. Higher home heating costs, rising inflation and rising interest rate levels will cause some construction slowdowns.

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.

The really surprising thing is the lack of inflation given this kind of growth.