Expectations are carved in stone that the US Federal Reserve will shift borrowing costs higher next week with the central bank’s policy shift seen in some quarters as justifying optimism over the economy. The (perhaps perverse) logic goes something like this: since the Fed is raising interest rates, the economy must be gaining momentum. Never mind that virtually every analyst is simultaneously downgrading the prospects for fourth-quarter growth to an average of about 2 per cent (in real terms), which has been the pattern in virtually every quarter since the third round of quantitative easing was introduced. With a rate rise this month effectively priced by markets, speculation is focused on the trajectory of rates in the coming years. Here, many economists forecast that by next December, borrowing costs set by the central bank will be 150 basis points higher than they are currently. Yet their optimism ignores many key data points which portend far less joyous seasonal tidings. Indeed, it is possible to argue that the Fed may well reverse its first hike, rather than continue on the path of small, upward adjustments in the cost of short-term money. That is because there are lots of macro and micro data points to suggest that the economic healing is still far from complete.