THE American economy faces a crucial turning point in the coming months. After over six years of near-zero interest rates and three rounds of quantitative easing, the Federal Reserve is poised to begin tightening. Is 2015 the year for liftoff? The Fed seems to think so. According to its latest forecasts, 15 out of 17 Federal Open Market Committee (FOMC) members expect a rate hike by year-end. This view is based in part on the expectation that inflation will move towards its 2% target. An earlier rate rise would help stave off inflation while containing possible bubbles in stock and housing markets. Minutes from the latest FOMC meeting indicate that members believe an earlier hike would also “convey the committee’s confidence in prospects for the economy.”

Not everyone is convinced. The International Monetary Fund has urged the Fed to keep rates low until at least 2016. The IMF reckons that low inflation and residual slack in the labour market call for at least another few months of easy money. Hiking too early could destabilise financial markets and increase the risk of deflation. Interest rates, moreover, are not always the best tool for keeping frothy asset markets in check.

An historical analysis of past recoveries suggests that patience may indeed be in order. The Fed’s preferred measure of consumer-price inflation, the Personal Consumption Expenditures (PCE) index, is currently running at just 0.2% year-on-year and has fallen below the Fed's 2% target for 38 straight months (see chart). Core inflation is currently a mere 1.2%. The PCE index has increased a total of 9% during this economic cycle. By this point in the last two economic recoveries, by contrast, inflation was well above 2% and prices had increased a total of 15%.

Wages tell a similar story. Nominal wages are currently growing 1.9% year-on-year and have increased by a total of 13% during the current recovery. By this point in the last two expansions, wages were growing at 4% and had increased a total of 19-20%.

Finally, while unemployment has fallen from a high of 10% to 5.3% today, other important measures have made little progress. The labour-force participation rate for prime-age workers (those between the ages of 25 and 54) is only slightly above its 30-year low. The employment-to-population ratio for this group, which measures the share of the population that is employed, is currently 77.2%, 2.5 percentage points below where it was at similar points in the past two recoveries.

As the September FOMC meeting draws closer, debate about the Fed's next move will intensify. Monetary hawks will warn of looming inflation and growing asset bubbles. Doves, meanwhile, will warn that a rate hike, no matter how small, will shatter the fragile American economy. Neither claim is true and the Fed would be wise to ignore such speculation. At the moment, the data recommend keeping rates where they are.