Outlook: US interest rates

PHEW! So it's only the quarter point afterall. Furthermore, US monetary policy has been returned to a "neutral bias", which should mean Alan Greenspan won't be going the extra quarter at next month's meeting either. It appears that markets should not have worked themselves up into such a lather afterall. Everything's fine, the non inflationary boom in the US economy continues unabated, and so too should the great bull market in equities.

That, at least, was the euphoric reaction of Wall Street last night, with the Dow Jones Industrial Average soaring back towards its all time high.

If only the position was as simple as that. In its statement last night, the Federal Open Markets Committee as good as admits, it doesn't fully understand what's going on in the US economy right now. "Owing to the uncertain resolution of the balance of conflicting forces in the economy going forward, the FOMC has chosen to adopt a directive that includes no predilection about near term policy action", it said.

In a sense, this is a great position to be in. There appears to be no need to do anything other than remain vigilent. But there is a problem. The longer the boom continues, the longer