AMERICA’S central bank tries to be predictable. When in December 2015 it raised interest rates for the first time since 2006, nobody was much surprised. The central bank had telegraphed its intentions to a tee. Similarly, if the overwhelming consensus in financial markets is to be believed, on December 14th—almost exactly a year later—rates will rise again, to a target range of 0.5-0.75%.

Donald Trump’s tweets and phone calls may upend trade, fiscal and foreign policy in a matter of minutes, but Janet Yellen, the Federal Reserve’s chairwoman (pictured), is tweaking monetary policy at only a cautious annual pace. 

Yet in another sense, the Fed has confounded predictions—at least, those it made itself. A year ago the median rate-setter foresaw four rate rises in 2016. None has happened yet. This might seem like a straightforward reaction to events. At the start of the year, stockmarkets sagged on worries about Chinese growth. Then, in June, Britain voted to leave the European Union, sending markets spinning again for a while. But the delay also resulted from a gradual acceptance by Fed officials that low rates have become a longer-lasting feature of the economy.

In September most rate-setters expected rates eventually to settle below 3%. This is down from 3.5% at the time of “lift-off” a year ago. Since June Ms Yellen has been saying that low rates are only “modestly” juicing the economy.

Now, though, the Fed is ready to move again. A look at the labour market reveals why. A year ago unemployment was already low at 5%. Since then the economy has created an average of 188,000 jobs per month. At first this helped the labour-force participation of prime-age workers, which fell worryingly after the crisis, to surge. It rose from a trough of 80.6% in September 2015 to 81.6% by October 2016, a spurt faster than any since 1985. Swelling numbers of jobseekers kept unemployment roughly steady despite robust job growth.

In November, however, participation fell slightly. As a result, job creation is once again pushing unemployment down. It now stands at 4.6%, the lowest rate recorded since August 2007. That is below its long-run sustainable level, according to at least 13 of 16 Fed rate-setters who penned forecasts in September.

Hawks argue that participation has reached its limit, so little slack remains in the labour market. Other thermometers are popping. It now takes 28 days to fill a vacancy, up from 23 days in 2006, notes Torsten Slok of Deutsche Bank. Firms small and large list hiring difficulties among their top concerns. For all the fanfare over Mr Trump’s agenda to protect jobs from outsourcing, fewer workers were laid off or fired in September than in any month since data started being collected in 2000.

Doves reckon this is mostly a mirage. Prime-age participation has climbed only a third of the way back to its pre-recession level. Even among those in work, there are still an unusually high number of part-timers who want full-time work.

The ultimate arbiter of this debate is wage and price inflation. If the economy is running hot, both should pick up. As it is, hourly wages are only about 2.5% higher than a year ago. But researchers at the San Francisco Fed have suggested that a slew of retirements by baby-boomers on fat salaries is dragging this average down. Measures purged of this problem show the median hourly pay rise running at fully 3.9%, almost as generous as in 2007 (see chart 1).

As for inflation, it is not yet back at the Fed’s 2% target. But it is getting closer. Excluding food and energy, prices are 1.7% higher than a year ago, according to the Fed’s preferred measure, up from 1.4% at the end of last year. Doves console themselves that even after rates rise, monetary policy will remain unusually loose for this point in the economic cycle. That partly reflects the asymmetry of risks before the Fed. Should an some unforeseen shock rattle the economy, there will be little room to cut rates to offset it. This, as Ms Yellen often acknowledges, justifies keeping rates lower than they otherwise would be.

Inflation risk, though, is starting to tilt upwards. Congress will probably cut taxes next year.

Higher rates may be needed to stop any fiscal stimulus becoming inflationary. Since the election, markets’ inflation expectations have continued on an upward trend that began in September. But Treasury-bond yields, which in large part reflect traders’ expectations for Fed policy, have risen dramatically (see chart 2). Rising oil prices and the prospect of Mr Trump’s imposing import tariffs also play a role. Both would crimp growth, but would do so in part by pushing prices up.

Surging bond yields and a stronger dollar are already squeezing the economy. So carefully has Ms Yellen managed expectations that a rate rise now will not exacerbate those trends. What would do so would be any hint that the Fed may bring subsequent rate rises forward, not push them back. For the first time in years, that does not look out of the question.