As unemployment falls, the Fed’s interest rate increases creep nearer.

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Federal Reserve officials have signaled that they are poised to raise interest rates this year as they try to put a lid on high inflation, and new data showing that the unemployment rate declined is likely to keep them on track to pull back their support for the economy.

The jobless rate fell to 3.9 percent in December, based on data collected during a period that largely predated the worst of America’s Omicron-driven virus surge. Unemployment peaked at 14.8 percent in April 2020, and had hovered around 3.5 percent for months before the onset of the pandemic. Fed officials expect unemployment to return to prepandemic levels by the end of the year, their economic projections released in December showed.

The rapid return to near-normal jobless rates has caused many central bankers to determine that the United States is nearing what they estimate to be “full employment,” even though millions of former employees have yet to return to the job market.

That’s partly because signs abound that jobs are plentiful, but workers are hard to find: Wages are rising swiftly, job openings are at elevated levels, and the share of people quitting their jobs just touched a record. Employers complain about struggling to hire, and a dearth of workers has caused many businesses to curtail hours or services.

“Several participants viewed labor market conditions as already largely consistent with maximum employment,” according to minutes from the Fed’s December meeting, released earlier this week. Others said the economy was making “rapid progress” toward that goal. Some suggested it could make sense to raise rates before maximum employment is reached, given the heady inflation.

Fed officials are worried that rising wages and limited production could help to keep inflation — now near a 40-year high — elevated. Price gains have been uncomfortably rapid over the past year. The combination of a healing job market and the threat of out-of-control inflation has prompted central bankers to speed up their plans to withdrawing their policy help from the economy.

They could raise rates three times in 2021, based on their estimates. That would make borrowing for cars, houses and business expansions more expensive, slowing spending, hiring and growth.

“It makes sense to get going sooner rather than later,” James Bullard, president of the Federal Reserve Bank of St. Louis, said during a call with reporters on Thursday, suggesting that the moves could come very soon. “I think March would be a definite possibility.”

Read More: As unemployment falls, the Fed’s interest rate increases creep nearer.

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