The buzzword at the Fed concerning price pressure is "transitory." The Street, however, is forecasting the growth pull back as the transitory input. The Q1 growth numbers have been reduced from the mid-3's to roughly 1.5%. A quick view of estimates for the rest of the year reveals a near universal hope that growth returns in Q2 and remains solid into year end. There are election cycle trends that support this call but the analysis may be too simplistic.

Reaching the 600B mark for QE2 is the reason most go for to explain the slowdown. The Fed will still be providing an inordinate amount of accommodation after June. Emerging markets, on the other hand, have felt the pain of inflation more directly and have been snugging. The combination of slowing growth in the Emerging World and anticipated resurgence in momentum here is a glaring problem. Domestic equity and commodity rallies, now termed "the risk on" trade, are very much a reflection of Emerging growth. Economic consensus sees the Q1 miss as transitory.

Yields (the term structure of interest rates) are questioning this view. The possibility of a more permanent malaise is being priced in.

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