While we look for the Fed to pause in June, we expect continued above-trend growth and inflation concerns will lead to further tightening (to 5.5%) in the second half of the year.
You're not seeing evidence of slowing in the report. That's significant. Status quo in terms of the growth rate won't be good enough to keep the Fed from raising rates beyond neutral.
The underlying strength evident in both durable and non-durable goods orders in recent months explains the momentum of the manufacturing sector.
The minutes confirm that the tightening cycle is indeed drawing to a close.
Businesses will be adding workers, so productivity growth will stay modest in 2006. The increase in unit labor costs is something the Federal Reserve is aware of, and it adds to the case they're going to continue raising rates.
While market participants are focusing on the recession signal associated with an inverted yield curve, consumers are feeling more confident about the economy heading into 2006.
There wasn't anything that the Fed said or did to imply that the easing cycle was over.
Retailers continue to report good sales momentum in the post-holiday period, bolstered by gift card redemptions.
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