Today the Federal Open Market Committee (FOMC) – the monetary policymaking body of the Federal Reserve – begins a two-day meeting. The primary topic, of course, is whether the Fed should raise the target for the federal funds rate from 3.75 percent to 4.0 percent. There are several possible considerations.

The first is purely political. Does the Fed want to be seen raising rates a mere six days before the election? Would that be seen as a critique of Republican stewardship and tantamount to putting its thumb on the electoral scale? (And, seriously, what genius scheduled a meeting right before the election anyway?) Let’s acknowledge those issues and just set them aside.

On the policy, the issue revolves around the Fed’s dual mandate for price stability and full employment. Clearly, with inflation above the target there has to be some consideration given to raising rates to get back to 2-percent inflation. But would doing so endanger growth and thus full employment? And is it even needed, as one might argue that inflation is on track to diminish anyway?

One can go in a circle with various arguments for raising or holding steady. A way to structure the discussion is in the context of the Taylor Rule, developed by economist John Taylor in 1993 to guide the setting of short-term rates. In simple terms it is:

Target rate = r^* + p + 0.5(p – p^*) + 0.5 (Gap)

where r^* is the equilibrium real rate of interest, p is the inflation rate, p^* is the target rate of inflation, and Gap is the difference between actual gross domestic product (GDP) and full-employment GDP.  At the moment, the economy is roughly at full employment, so Gap is zero. Inflation is roughly 3.0 percent, while the inflation target is 2.0 percent. Finally, most estimates of the equilibrium real rate run around 1 percent. Plugging all this in yields a Taylor Rule target rate of 4.5 percent.

With no concerns on the employment mandate (the same thing as saying Gap is zero), rates should go up by at least 50 basis points to combat inflation. And Eakinomics could argue that the equilibrium rate has risen recently and inflation is actually above 3.0 percent, meaning a target rate of 4.5 percent is a conservative estimate.

The bottom line is that pure policy is telling the FOMC to raise. To think that inflation will return to 2 percent without action is just (continued) magical thinking. Political considerations may keep the FOMC on hold this meeting. If so, it should make up for lost time at the December meeting.