Donald Lambro

This is why economy watchers are worried that Bernanke will misread his economic tea leaves and raise interest rates longer than necessary. The long march upward in quarter-point hikes may seem harmless at the Fed, at least in the short-term, but it's their hidden long-term impact that we should be concerned about.

"When the Fed raises rates, it takes six to 12 months for the effect of rate hikes to be felt in the economy," said global economist David Smick, who publishes the International Economy magazine.

"If you wait until you see signs of weakness by raising rates, you will generally overshoot in the context of monetary policy because once the weakness appears you still have six months of the effects from tightening still to come out," Smick told me.

"So since the economy is strong, the Fed will probably overshoot. The question is whether it happens this fall or in 2007," he added.

That scenario is very problematic for the Republicans and the White House, who don't want to see any softening in the economy this fall when control of the House and Senate will be up for grabs.

There is a general consensus among economists here that the Fed will raise interest rates another notch to 4.75 percent when the Federal Open Market Committee meets next on March 28.

Bernanke sent that signal last week when he said that "some further firming of monetary policy may be necessary." And he may be prepared to raise rates several times more to reach his inflation targets. He has cited a 1 percent to 2 percent target in the past.

That inflationary level might require some significant tightening, beyond what pro-growth advocates would like in an economy that has been buffeted by some pretty strong head winds in recent years. That's why Dave Smick is appropriately worried about "the lag time" of the Fed's actions under Bernanke's chairmanship. "Let's say that the core inflation rate tops out right now, but you will still have another six months in the pipeline of tightening. It always takes a lot of courage for the central banker to stop," he says.

Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.