The widespread belief in a Goldilocks economy, in which everybody lives happily ever after, may not be shared by members of the Federal Reserve. As they gather for a policy meeting Tuesday, some of the central bank’s green eye-shade gang is known to harbor concerns that at least a modest degree of pain will be needed to slow activity and fend off inflation.

The Fed has taken a pause since late June, after boosting short-term interest rates 17 times in less than two years. That has prompted talk of a “soft landing,” in which the economy becomes not too hot, not too cold – just right. Which means no more rate hikes.

But others aren’t buying it. With wages growing at the fastest pace in 5 years, they say price pressures haven’t abated.

A fresh reading on the economy occurs Friday, with a report on third-quarter gross domestic product. Economist Brian Wesbury expects it to show expansion at a 2.5 percent rate, not much below the 2.6 percent in the second quarter.

“The economy has lost a little bit of its edge, but what we are seeing is an air pocket, or a lull, not a real slowdown,” said Wesbury, of First Trust Advisors in Lisle, Ill.

Over the next six months, activity is likely to speed up, advancing to a 3.5 percent rate, he said, because consumers continue to spend at a rapid clip.

“For members of the Fed, it will be a rude awakening that the slowdown isn’t for real,” Wesbury said, predicting that a further rate hike will be needed early next year.

Housing boom

A 5.9 percent leap in housing starts last month and a rebound in stocks of home builders has had some analysts declaring that the worst is over for the real estate market. Additional reports flow out Wednesday and Thursday, with September existing home resales and new-home sales, respectively.

Economist Ian Shepherdson is unconvinced that a revival of housing activity will prove long-lasting. His concern: building permits remain profoundly weak.

“In the year to September, permits were down 27.7 percent, but the third-quarter drop was an even more spectacular 39.9 percent, at an annualized rate,” said Shepherdson, of High Frequency Economics, Valhalla, N.Y.

Translation: further weakness in construction is unavoidable.

12,000 not magical

The Dow Jones industrial average managed to cross the 12,000 mark last week, setting new records, but some analysts harbor doubts about how far stocks can extend recent gains.

A big worry is the recent drop in commodity prices, which torpedoed such stocks as Caterpillar Inc. on Friday. The Peoria-based equipment maker suffered its steepest setback in 19 years.

Although lower commodity prices, especially for gasoline and lumber, provide a fattener for consumer wallets, “they also represent a cooling off in demand and in economic growth,” says Flossmoor investment adviser Richard Evans.

He is telling clients that crumbling commodity markets in 1980 triggered a stock reversal “that caused the Dow industrials to drop by 24 percent over the next 15 months.”