As we go over the latest numbers and ask the question, "how much closer is the Federal Reserve to raising interest rates?", one good metric to keep in mind is the economy's potential growth rate.

This is the limit to how fast the GDP (gross domestic product) can grow without causing inflation pressures to build.

Economists seem to think that rate is now around 4%, whereas they used to think it was just 2.5% to 3.0%. Thanks to productivity, lots of investment in high-tech, efficiency-producing stuff, we can grow faster without stirring up price pressures, so the theory goes.

Does that mean if the economy is growing at 4.2% (this morning's annualized first-quarter GDP reading) or higher in future readings, that the Fed has to hike rates right away?

Not necessarily.

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That's because when the economy was growing more slowly, below potential, it produced an output shortfall, an output gap, and some say the Fed won't have to raise rates until that gap is filled in, and we're not there yet.

One reflection of that gap is the number of people who are still unemployed or underemployed. Another is the excess capacity at a lot of factories. But it is probably true the faster the gap gets used up, the closer is the Fed to hiking rates.

What is disturbing to bond market vigilantes, ever on alert for signs of rising inflation, is the big increases in the GDP "deflators." These are basically inflation measures that the government uses to convert dollar amounts of GDP into "real" amounts. In fact, Alan Greenspan's favorite inflation measure, the core PCE deflator, jumped 2.0% in the first quarter after rising just 1.2% in the fourth quarter. Because it takes out food and energy, you can't say the core PCE deflator is an oil story. In fact, clothing prices were one thing driving it higher.

The big question is, can it last? Can people afford to keep buying more stuff if prices are rising faster and faster?

Some light might be shed on that question by the employment cost index for the first quarter. Wages rose just 0.6% and are up just 2.5% over the past year. Is that the fuel for an inflationary spiral? Or will families that have to pay more to fill their SUV's tanks and buy their kids clothes find that they have to cut back? That's a key question and one that will probably be front and center for the Fed.

Bottom line, even if the Fed isn't all that worried about inflation, it's got to be more comfortable with the notion that GDP growth is here to stay. And if it is, then it's going to be more and more uncomfortable keeping its key short-term rate at a 45-year low.  

Kathleen Hays anchors CNN Money Morning and The FlipSide, airing Monday to Friday on CNNfn. As part of CNN's Business News team, she also contributes to Lou Dobbs Tonight.