Christmas came early this year for Janet Yellen and those of her monetary policy committee colleagues eager to begin raising interest rates. Just a tiny bit, but enough to show that they remember how to do that after eight years of holding rates to just about zero. First gift: Santa, disguised as a European Central Banker with a decidedly Italian accent, misjudged the markets. His plan to drive down the euro and thereby drive up European exports fell so short of expectations that the euro actually rose, to the wailing of traders who shorted it in anticipation of Mario Draghi’s announcement. That allowed the dollar, already at a 12-year high and by Fed estimates knocking 0.5 percent off GDP growth, to sink a bit, and removed Fed fears that if it raised interest rates just when the ECB was lowering them – tightened just when the ECB was loosening – the dollar would jump and our exports would become less competitive in overseas markets. Draghi’s misstep ended that worry.

The second early gift was delivered when the government reported yesterday that the economy had added 211,000 jobs in November, and raised job-creation estimates for the previous two months by 35,000. With the major exception of mining, which has lost 123,000 jobs in the past year as oil prices plunged and the Obama administration continued its war-to-the-death on the coal industry, most sectors added jobs, including retailing (+31,000), which means retailers are approaching Christmas in an optimistic frame of mind, even though Thanksgiving weekend sales were more ho-hum than ho-ho-ho.

The Fed has always claimed that it is data-driven, and the steady revving up of the U.S. job-creation machine seems to be the last bit of data Yellen needed to begin raising rates as she and a majority of her colleagues long have hinted they would when the economy strengthened. She used speeches in the past weeks to tip her hand – provide “forward guidance” in Fedspeak. “The labor market has improved … real GDP has increased at a modest pace … household spending growth has been particularly solid… increases in home values have pushed up the net worth of households…”.

Never mind that the manufacturing sector seems to be contracting. The rate rise will be announced in a few weeks, along with a promise to put any future increases on a long, slow glide path back to something resembling levels once considered normal. Kevin Mahn, president of Hennion & Walsh Asset Management, expects the Fed to follow its 2004-2006 pattern, when it took rates up in 17 equal increments of 0.25 percent.

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