The economy is generally slowing for a wide variety of reasons - energy is one, but also the stimulus is wearing off.
The data will certainly encourage views of a truncated Fed tightening cycle.
My concern is that what's happened here is that inflation is higher than the Fed anticipated. On top of that, the kind of tightening already imposed by the markets, in terms of lower equities and higher bond yields, is setting up weaker growth in 2005.
These cross influences are confused enough that one has to stick with the broader trend that we still view as bond negative.
The labor market has not accelerated to the extent one might expect, judging from past cycles, and we probably won't see evidence of it again in the December numbers.
For the Fed, I don't think it changes much. It's not weak enough that it would change their measured tightening path.
There should be no doubt that instability in the region should have a profound impact on the long-term risk assessment globally.
The data should tend to encourage views that the Fed is correct and that inflation looks to be contained.
The problem with inflation targeting is that it carries with it a risk of less flexibility at times, and that could be problematical. But it also makes policy less of a black box, so policy is likely to be more transparent.
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