In addition, the Index of Leading Economic Indicators and the Consumer Confidence Index are at all time highs for the country.  These indices strongly suggest that the economy will continue on its upward path through spring.  If this happens the US will set an all time record for the length of an economic expansion.  As a matter of record the end of February will mark the 107th consecutive month of economic growth.  Meaning that this expansion will eclipse the period of February 1961 to December 1969 as the longest period of uninterrupted growth in the nation's history.

     This prosperity does not come without some concern.  The Federal Reserve, for example, continues to worry about inflation.  Even though evidence is non-conclusive at this time, the Federal Reserve nonetheless believes inflation could be quickly kindled by wage pressure.  Consumer expenditures, fueled by strong income growth and the stock market, could lead to a situation where demand outruns the ability of the economy to supply goods and services.  Given the reported labor shortages that already exist, employers will eventually be forced to increase compensation and raise prices.  Even though productivity has been rising and most likely will continue, the Federal Reserve also believes that it is highly unlikely that productivity growth can indefinitely out pace wage pressure.

     Moreover, the Federal Reserve is figuring that there is a high probability that the world's economy will rebound in 2000.  Economic indicators suggest that many areas of the world are ready to come out of their economic doldrums and are poised for a substantial expansion of their economies.  If this transpires, foreign made goods and services will go up in price and contribute to the inflationary pressure. Many analysts believe that cheap imports from economically depressed regions of the world have been a very significant factor in keeping our domestic inflation in check.  To the extent that this situation changes, there will be additional upward pressure on the price level.

     Given the aforementioned it is believed that the Federal Reserve is set to make a series of upward adjustments to interest rates.  This will be done in an attempt to tighten credit markets and slow domestic demand for goods and services.  By doing so the Federal Reserve hopes to allow the economy to operate at a level of activity that does not produce accelerating inflation.  In addition, a Fed official recently indicated in a speech to business leaders that it appears the economic output of our country is currently above its potential and the rate of economic expansion is well above the historic trend.  This assessment of the current economic situation lends support to the notion that a series of interest rate hikes is the most likely scenario in terms of monetary policy.

     Critics of the Federal Reserve, however, will point out that inflation is under control, and there is no hint that productivity gains from information technology will not continue into the foreseeable future.  They also point out that compensation pressures are being effectively managed, not by just productivity gains, but also through the means of stock options and the enhancement of other fringe benefits.  The main concern of critics is that the Federal Reserve will cause unnecessary economic hardship in attempting to engineer a soft landing of the economy.