In the heady history of America's stellar boom, Tuesday was indeed a highly significant moment. Alan Greenspan and the rest of his Federal Reserve board jacked up interest rates by a full half a percentage point - the biggest in five years - taking borrowing costs for ordinary Americans to a level not seen since the last US recession a decade ago. Just how significant the moment will be will depend on an edgy few months that now undoubtedly lie ahead. Initial pointers gave little indication of its gravity. The stock-markets had once again long seen it coming and happily shifted higher - the exact opposite of what the text books say should happen when you lift interest rates, a cannibalising of his polices that Mr Greenspan now must live with. The irony is chilling. Mr Greenspan is now such a valued talisman, they are so happy with his leadership they effectively ignore what he is trying to tell them. In raising rates, Mr Greenspan moved in a bid to cool the wider economy and keep the inflation wolf from the door, or muffle the sounds of its barks at least. The drama of the act was fitting. There is a jarring sense of transition out in the wider economy. The nation's top chief executives recently voiced mild pessimism, expecting a tighter labour market and slower growth and another similar rate rise later in the summer. Other analysts too are sounding warnings that change is afoot. Whatever individual analysts say about Mr Greenspan's policies, most agree on the special nature of inflation in the current expansion. It is the one thing that has set this boom apart from many others. Inflation has defied traditional expectations by staying low as the economy soars, kept down by rising efficiency and productivity - courtesy of new technology. An adequate supply of workers has played its part, too. Once employers start having to pay workers more, other costs start rising. Mr Greenspan continues to acknowledge the special role of technology yet tempers his words with warnings that productivity cannot accelerate indefinitely. These fears have been given new life in recent weeks as the new high-growth, low inflation constant has come under threat. Signs of possible inflation have emerged beyond simple rising oil prices. April employment figures showed the lowest unemployment rate in 30 years. Consumer activity - much of it credit-fuelled - continued to soar to new heights on the back of soaring stock prices. Just consider the wealth which is out there - in the fourth quarter last year, the net worth of American households rose 9 per cent - a hard-to-comprehend US$3 trillion. And even once last months' market volatility was considered, it soared another 4 per cent in the last quarter. Not only are such figures unsustainable, they also come laced with danger. A new study by John Makin, resident scholar at the American Enterprise Institute, a private Washington think-tank, warns that wealth and spending surges are putting an otherwise healthy economy at risk. 'The Fed's excruciatingly slow no-surprises approach to raising US interest rates is beginning to look like a policy mistake,' he thunders, claiming the markets are anticipating a far softer landing than may come. He points to other warning signs in the economy - a record-shattering current account deficit that suggests America spends US$1.3 billion a day more than it earns. Such imbalances are dangerous should foreign capital flowing into American dry up through problems in the US dollar or in the market - all leading to the 'worst possible situation for the Fed'. 'Perfection could turn to stagflation - slower growth and higher inflation - in coming months, thereby inverting the growth-without inflation combination so characteristic of this remarkable expansion of output and wealth.' Others, of course, say the rate rises are already too much and Mr Greenspan risks driving the economy into recession - a view held by some politicians in both main parties. Unions, meanwhile, insist wages are being kept down and ordinary Americans are unfairly paying for avarice through rises in the cost of borrowing. Such views cannot be ignored. A veteran of Washington who has served directly under three sitting presidents, Mr Greenspan knows the pressures. This economy - hot as it is - holds the key to Vice-President Al Gore's election as president in November and the protection of the troubled legacy of President Bill Clinton. These pressures can only intensify before a second similar rise is made. Another significant economic moment - made even more so by its place in the most political of years.