The case for continued rate hikes has become, if anything, more compelling since Katrina.

The crux of the statement was unchanged (from the last meeting), ... They said that policy remains accommodative, but that the central bank will respond to changes as needed. That's been the mantra since the tightening period began last June.

The crux of the statement was unchanged (from the last meeting). They said that policy remains accommodative, but that the central bank will respond to changes as needed. That's been the mantra since the tightening period began last June.

The durable goods report for December was extremely strong. The headline rise of 1.3 percent was decent, but some of the underlying statistics were even more impressive.

The economy is still growing at an above trend pace and with slack in labor and product markets all but fully absorbed, inflation pressures will begin to gradually build this year.

The 'economy is weakening' crew will have a field day with this report. But until we see two weak numbers in a row, I am absolutely unconvinced. . . . Disappointed? Definitely. Changing our big picture view? No.

The economy retains ample momentum early in 2006.

The economy has a lot of momentum. The consumer continues to do well because of the improving labor market, and businesses have a lot of cash and are getting more confident about deploying it.

The economy is clearly advancing nicely right now and it will in our view take more than a 5% funds rate to slow it down.

The economy is clearly strong right now, and that's what these numbers reflect. In the short term, there's a risk people will pull back on spending, but that depends on how long gas prices stay high, and so far there's not much evidence the consumer is slowing down.