The markets are assuming that the Fed are finished tightening for the year, ... That presumption might prove to be premature. We, and the Fed, will wait and see.

The future path for monetary policy depends critically on at least a flattening out of interest-sensitive spending, ... It is touch-and-go whether the softness in interest-sensitive spending is sufficient to be consistent with the required degree of overall economic slowing.

The economy is in very good shape and people don't realize it. We really do have low inflation and low unemployment, and the economy has been growing at a rate of 3 percent or better since the last recession.

The inflation data does not take the Fed out of the picture,

The inflation data does not take the Fed out of the picture. It does, however, remove the risk of the Fed having to tighten 50 basis points on June 30.

The great post-Katrina inflation scare has vanished, with gasoline prices coming back down to Earth and core inflation on track to match the Bank of Canada's latest estimate of 1.6 per cent for Q4.

All in all, the year-over-year trend in income jumped to 6.1 percent from 5.4 percent, suggesting that consumer fundamentals remain very strong, ... Consumer spending remains on a tear.

These figures reinforce the slowdown view, ... The weakness in confidence increases the odds that a sustained soft landing is moving into place.

The key here is that we anticipate what the big issues will be and that we take actions today to prevent or at least mitigate the disruption.

I do believe there is still evidence that the economy is red hot, and I think the Federal Reserve will be monitoring the income numbers closely to decide whether to go 25 basis points or 50 at their upcoming policy meeting.