U.S.: Be Patient, Investors. The Fed Certainly Is

Prior to the Federal Reserve's Nov. 15 policy meeting, many investors were looking for signs that Greenspan & Co. were thinking about cutting interest rates. Judging by the Fed's statement after the meeting, some of that anticipation was obviously wishful thinking. The Fed said that the possible inflation threat from tight labor markets and higher oil prices was still too great for it to relax its guard just yet.

However, despite the hard edge of the Fed's words, more and more evidence supports the view that the outlook is falling into line with what the central bank wants to see. The Fed even suggested that the softening in business and household demand, along with tighter financial conditions, could result in a slowing of the economy's growth rate to a pace below its so-called noninflationary speed limit, generally taken to be about 3.5% to 4%.