Interest rates are unchanged again this week. For that matter, long-term rates have not moved for almost two months, the all-defining 10-year T-note within a short snowball throw of 1.80 percent ever since October 15, 30-fixed mortgages near 4.00 percent.

That’s the back-look. But out here on the streets we’re concerned about the next corner. What will we find? Black ice? A pack of kids loaded with slushballs? The next move in rates, whether market- or Fed-driven will depend on the economy, accelerating or decelerating.

Which is it?

All data this week were on the shaky side except one. Abe Lincoln once polled his cabinet, all seven saying nay, then raised his right hand and declared “The ayes have it!” The story is a fable, but perfect for today. No matter how weak all other reports, today’s employment data put the Fed at dead center, no action likely.

The employment report is wild, 266,000 new jobs in November, including return of GM strikers but in addition a 41,000-job upward revision to prior months. Neither markets, nor the Fed, nor I believe the outsize number, and certainly not as an inflation risk (wages are still stagnant), but a report like that intercepts any thought of a Fed easing move.

The other data were not bad, but not accelerating. The best flash reports of the immediately prior month are the twin ISMs — the end-of-month polling of purchasing managers reported in the first business days of each month. The manufacturing one for November fell from 48.3 to 48.1, below the survey level for growth at 50, but manufacturing is a small component of the U.S. economy. The four-times-larger service-sector ISM arrived at 53.9, down from 54.7 in October. Those low ISMs are incompatible with the reported payroll gain, and history says to trust the ISMs.

Aside from the run of always-dated economic data, the largest force on markets is the daily plucking at daisy petals in response to hints from the White House: a trade deal… no trade deal… a trade deal… no trade deal…. Stocks are especially sensitive, but rates also lurch with each petal. The one sure thing, looking back to the August 1st tariff spasm: trade war is not doing as much damage here or anywhere as feared. That fear got the Fed to ease three times and mortgages to 3.50 percent, but severe damage has not materialized.

In the long run inflation is the issue. I spoke to a group of CPAs yesterday, revisiting Fed policy and inflation back to the 1950s. Their questions were so good that I was still trying to think of answers all evening yesterday.

Staring at long-term charts, back to WW II it is clear that inflation was buoyant, and hence Fed Enemy Number One. In theory, left unattended by the Fed, inflation would rise, and it did, by 1980 spectacularly so. Hence a deep culture at the Fed: eternal vigilance, the assumption inflation was rising even when it wasn’t, and on supposition or fact throw several million Americans out of work in order to suppress the threat.

Prices ran out of control from 1965 to 1980 partly because of overwhelming force, first the “guns and butter” of Vietnam, and then the two upward explosions in oil prices. The Fed could not cause — dared not cause — recessions deep enough to offset price pressure until the public grew weary of inflation and supported Paul Volcker’s brutal stop, 1980-‘82.

But there is more to that inflation-buoyant era. The U.S. economy had little global competition, nothing to prevent oil-price “shocks” from moving into a U.S. wage-price spiral. The U.S. economy was inflexible, especially in energy. It took a decade for conservation to take hold through replacement with more efficient autos, appliances of all kinds, and building standards — and just as long to bring on new supply of oil. The shocks of the 1970s have had lasting effect: the global economy is far less sensitive to oil. ¨C14C ¨C15C ¨C16C ¨C17C ¨C18C ¨C19C ¨C20C

The 10-year T-note in the last three years. It will take something big to knock it out of the steady pattern of the last two months:

All of the foregoing on low inflation… ahem. The Atlanta Fed GDP tracker has found sudden strength:

…And the ECRI sees the same rebound. No matter how controlled inflation may seem, if the Fed sees an accelerating economy it will not be able to stop itself from rate hikes to prevent inflation, even if a historical fantasy: