Say's Law

JACKSON HOLE, Wyo. -- The president of the Dallas bank, who had been voting

against higher rates through August, quit

doing so in November.

The central bank

says that it is very likely to tighten at the earliest opportunity.

The president of the Richmond bank

says "the principal risk in the near-term outlook is that continued exceptionally strong domestic demand for goods and services may eventually cause the economy to overheat, and I think this risk is rising." And that long-term interest rates are "still relatively low by historical standards." And that policymakers are moving from "attaining price stability to maintaining price stability." And that he hopes "you will support us as we make this transition."

The

Market News

mouthpiece says that "there is an intense awareness among policymakers that the Fed has done little, if any, real tightening." And that policymakers "are happy to see the bond market pushing up long-term rates, although they downplay the extent of the increase in real terms." And that the central bank is taking "a relatively cautious approach" for now, "but it has not forsworn the need to act decisively to preserve price stability."

The president of the Chicago bank says that policymakers "don't want to artificially boost growth in demand with an overly accommodative monetary policy. Recent growth has likely been too rapid to sustain for the long run." And that the shrinking labor pool "can't go on forever." And that against a backdrop of healthy domestic demand and rising foreign demand, the central bank will need to "remain vigilant regarding inflationary pressures."

A market letter circulating this morning says that

G. Love

is intent on raising rates by a full percentage point -- either two quarters and a fitty or two fitties -- during the first half of the year. And that he won't necessarily have to see strong growth data or a pop in core prices to do it.

Santa's Dead

It is usually always a good idea to treat these things like the storefront windows they are -- get a good gawk, make a comment or two, move on -- but here one wonders.

Could this all add up to preparation?

There are probably two risks worth considering here.

The first is that G kicks us in the stomach on Thursday.

It is kind of hard to believe (for this correspondent, anyway) that the guy won't be at least a little hawkish. Yellow light? Maybe. Green light? Uh-uh. He seems more likely to tell the market that it's been getting things right.

The second is that policy rates will move up faster -- and sooner -- that most participants expect.

Can three-quarters of a point over six months turn into a full one over four?

And what if it does?

The point here is that a quarter-point tightening next

month became a given last month. There now exist a few things that introduce the possibility that the tightening cycle will ultimately prove at least a little meaner than most folks reckon, and it's wise to keep an eye out for more clues to same.

That's all.

Side Dish

If 43.3%

counted as a win?

Then

this does too.

All apologies to the losers.