There is relief because the global meltdown that many feared a year ago in the wake of crises in Asia and Russia has not materialized. The hole was so big, you couldn't see the bottom. The Board's optimism was based on this apparent insulation of major world markets from further hiccups in emerging countries. Such anxiety as there is stems from the fact that the current prosperity of the core economies, especially the United States, rests on foundations that are already being undermined, in particular by the expanding U.S. trade deficit. The Board focused on the U.S. as the engine of world growth.
Many indicators are encouraging.
Nevertheless, this rosy picture has blemishes that are likely to grow. But a market correction could quickly erase those paper gains and choke off the spending boom. The rising stock market has also fueled a boom in new industrial capacity, because companies have been able to finance their plant and equipment more cheaply. The humming U.S. economy is sucking in imports, while struggling economies in Asia and Latin America have cut their purchases of American goods and services. The Board agreed that the U.S. still had room to maneuver, particularly because flourishing U.S. markets are soaking up lots of foreign-held dollars.