What's interesting is the changing nature of the Fed's critics. For most of the past year, the loudest and most common criticism of the Fed and Chairman Alan Greenspan has been that monetary policy was being tightened at all. Over the last month, the dominant criticism has been Greenspan's preference for a gradualist approach to hiking rates. With this tidal wave of support for tough monetary policy, it's worth keeping in mind that monetary policy works with long lags. It isn't a case where the central bank raises rates today and the economy starts slowing tomorrow.
Most economists accept that it takes about a year before higher rates start to slow the economy.
Recent evidence of slowing in the U.S. economy is very tentative. At last week's close of US67.25 cents, the beaver buck was in the lower fifth of this year's trading range. The challenge for the Bank of Canada is that it doesn't want to be seen slavishly following the Fed's lead. That shouldn't be a problem - except in terms of timing. In its Monetary Policy Report of last week, the Bank of Canada cautioned that the Canadian economy was already close to operating at full capacity and that inflation would likely rise over the near term.