Donald Lambro

But the minutes also explained the fears that were expressed around the Fed governors' table as they raised the federal funds rate another quarter of a point to 4.75 percent, the highest in five years:

"Some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy," the board's minutes said.

Well, I'll be darned, that was exactly the fear expressed in my Feb. 20 column which said:

"This is why economy watchers are worried that (Fed Chairman Ben) 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."

In that column, I quoted economic strategist Dave Smick, who heads an international consulting firm here, warning that, "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."

This fear of overshooting was spelled out in the Fed meeting's minutes, and it will be the chief reason when they decide to stop raising rates.

But what about oil prices? Won't they worsen inflation? Perhaps, if the price keeps rising. But that did not happen last year when oil went to $50 a barrel, then to $60, then to $65. The economy seemed to absorb the price hikes without any serious impact on its growth, jobs or the core rate of inflation. I think that will be the case this year as well. There is nothing wrong with the price of oil and gas that new, aggressive exploration, drilling in the outer continental shelf and in Arctic National Wildlife Refuge, and a lot more gasoline refineries cannot cure. For now, though, with gas prices hitting $3 a gallon for regular, I suspect we will see a drop off in gasoline sales as motorists cut back a bit on their driving, and a rise in inventories as refineries push to meet demands. The market place always responds to higher prices.

Donald Lambro

Donald Lambro is chief political correspondent for The Washington Times.