Did the Fed err in raising interest rates?

The renewed turmoil in global financial markets together with the downward revisions to estimates of fourth-quarter GDP growth in the US have prompted claims that the Fed made a serious policy error in raising interest rates late last year. With the risks of an extended downturn in the US economy still modest, however, and domestic price pressures building, it would have been foolish of the Fed to ignore the cumulative improvement in labour market conditions for any longer.