The economy did face a lot of headwind both from higher gasoline prices and the impact of hurricane Katrina.

This is all a bit of a puzzle. It will depend obviously on how quickly these areas can be repopulated, and also you've got the positive of reconstruction spending and the fact that that will create jobs.

The jump in import prices will fan the new-found fears of inflation in the markets and at the Fed.

It is quite sensible for them to sit back and see where they are.

The only uncertainty surrounding the decision is the wording of the accompanying statement and, in particular, whether the assessment that 'some further policy firming may be needed to keep the risks ... roughly in balance' will be dropped.

This is all a bit of a puzzle, ... It will depend obviously on how quickly these areas can be repopulated, and also you've got the positive of reconstruction spending and the fact that that will create jobs.

I do not expect core inflation to rise much above these levels. But were it to do so, this would seal the case for more rate rises.

The bottom line is that a current account deficit of this unparalleled magnitude is unsustainable and there is no hope of it being resolved painlessly through higher exports alone. Instead it will require a big dollar depreciation alongside much weaker domestic demand for imports.

As far as the Fed is concerned, payrolls growth is probably just about right -- not too hot and not too cold.

The slowdown in the pace of job creation