In the coming week investors will be looking at the two day Federal Reserve policy meeting ending Wednesday to see what the Fed has to say about inflation. It's a foregone conclusion that rates will stay steady at 5.25%, and I don't imagine the Fed statement will get more aggressive. The folks at the fed must be getting pretty scared though, the one thing they fear most is inflation coupled with a stagnating economy (the dreaded "stagflation").
We aren't there yet and we don't have reason to be concerned right now, but it must be on the Fed's mind. They may want to try to get ahead of such a problem by moving early and thus they may see the recent reports and stock activity as signs of weakness and lower rates this year, but we won't see that move for a while.
Helping promote the idea that things are weakening, many experts are predicting the fallout from the subprime loan implosion will cook the buying power of low-income consumers.
