It's been a long time since economists dared to consider former Federal Reserve chief William McChesney Martin's deathless phrase that it is the Fed's job to "take away the punchbowl just as the party gets going." But with Wall Street surging and both business and consumer confidence on the mend, the question at the moment is not if interest rates will rise in 2004, but when. Some believe the first hike could arrive as soon as May, especially should the economy continue to sizzle.

After several years' worth of setbacks and false starts, the economy is showing clear signs of robust growth, helped at least in the short term by a series of presidential-sized tax cuts. How much oomph is left to carry growth into the next several quarters remains to be seen.

Regardless, George W. Bush seems quite jolly about the health of the economy as the new year is beginning, with GDP clocking an astounding 8.2% annual rate of growth for the third quarter, the manufacturing sector in a rebound and capital spending on the rise. The notable exception–and it is clearly a big one–is payroll growth. No doubt, the shape and timing of a recovery in employment will go a long way toward determining the size and timing of the Fed's next move. In the meantime, the nation's surging productivity rates and lean payrolls have helped to send corporate profits up 30% in the third quarter of 2003.