• Inflation pressures have reached a "stasis", but at too high a level
• Cannot say with conviciton that inflation has turned the corner
• Sharp correction in housing may not yet be over
• Will not be surprised to see 2H07 GDP growth above 2%

I continue to believe that the hawkish Fed comments on inflation are just jawboning, and that inflation has likely already peaked for this cycle. Commodity price increases were exacerbated by record fund flows, and likely skewed inflation expectations.