Next Fed move unlikely until end of 1st quarter or beyond, contingent on economic performance in interim. Inflationary trends still bear watching. Current US inflation rate should be 2 percent. M2 growth rates slowed to under 2.5 percent through September 1996 from 5 percent earlier in year. Mutual fund investments increasingly becoming substitutes for conventional bank time deposits in consumer wealth portfolios.
Bond markets skittish, respond sharply to any mildly suggestive inflationary information.
No political consensus on more decisive intervention. Weak balance sheets also constrain credit demand. Bilateral merchandise trade imbalances not moving towards equilibration very rapidly.