Near triple digit gains for 2007 in food and fuel and rising export/import prices from the weak $ policy will keep core inflation on the high side for a long time.

And with the great pricing of risk ‘crisis’ no longer a forward looking phenomena, the beginnings of a housing recovery, financial downside surprises behind us, and exports continuing to boom, the Fed’s concern switches to the ‘monetary easing’ they believe kicks in with it’s macro effects later in the year.

Most at the Fed say you can’t wait for core to start going up – it’s too late when that happens. Some say you can wait for it to move a tiny bit. Either way both concerns are now elevated.

A 50bp ‘insurance’ cut is still likely if the meeting were today. The next key numbers are claims tomorrow and next Thursday, as well as housing data due out, but seems that data at best could mean this is the last cut rather than take the cut away.

Equities may may do better as well, as financial write-off uncertainty is largely behind us, and the companies doing well in this environment lead the way forward, and PEs are very low.

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