When and how much? Those are the questions on the lips of investors, bondholders, and other Federal Reserve watchers. The Fed kept interest rates on hold at its Mar. 19 meeting. But the accompanying statement, in which the Fed abandoned its view that economic weakness was the greatest risk in the outlook, makes it clear that policymakers are thinking about the timing of rate hikes in order to bring monetary policy back to a neutral stance. Even so, there are other factors that argue for some rise in short-term rates—perhaps as early as June, as Wall Street expects. While the Fed"s words lessen the chances of a rate hike at the May meeting, they do not set the criteria for a possible hike at the June 25-26 meeting. The latest data seem to come down on the "evenly mixed" scenario. Businesses are backing off from last year"s feverish pace of stock-cutting, but domestic demand is holding up. Factories are busier in response to rising orders. In particular, the makers of tech equipment are boosting output at a rapid clip. At the same time, the wider trade gap in January suggests that some of the inventory swing is benefiting foreign producers. Keep in mind that a bigger trade gap subtracts from economic growth, but a rise in U.S. imports is necessary to give rise to a global rebound. That will eventually boost exports as well and help to better align monetary policy around the world. The Fed"s decision to shift to a neutral stance was probably made easier by the latest good news on industrial production. Output at factories, utilities, and mines increased 0.4% in February on top of a 0.2% January gain, which was first reported as a 0.1% loss. Manufacturing output rose 0.3% in each month, the best showing since mid-2000. Surprisingly, the long-ailing tech sector is leading the charge. Tech production is growing at a double-digit annual rate in the first quarter, vs. almost no gain in the rest of manufacturing. But even that small rise in nontech manufacturing is a vast improvement from the steep declines of the previous six quarters. Just as tech is fueling the rebound in U.S. factory activity, tech imports are leading the import rise. Incoming shipments of tech goods jumped 14.6% in January, suggesting stronger capital spending. As demand picks up, the Fed will want to remove itself from the equation of economic pluses and minuses. Step One was the shift in its view of the outlook. Step Two will be a series of rate hikes that will bring policy more in line with sustainable economic growth.