The Federal Reserve’s decision on interest rates Sept. 17 was probably one of the most unpredictable ones, with 58 forecasters expecting no-change and 53 expecting a hike. The Fed’s statement on monetary policy hints it was the developments in China forcing it to stay put.
The Fed’s is looking for progress in “measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments,” in order to fulfill its mandate of maximum employment and 2 percent inflation.
Peter Schiff of Euro Pacific Capital thinks the “international developments” refer to the economic situation in China:
“The surprisingly dovish statement was notable for the introduction of ‘international developments’ as an ongoing input into the Fed’s rate deliberation process. To many, this refers to the current uncertainty in China,” he wrote in a note.
He thinks this might merely serve as an excuse for the Fed not to hike rates indefinitely, but the impact of the Chinese crisis on the U.S. economy should not be underestimated.
Epoch Times has previously reported the Fed might even use a rate hike to further exacerbate the problems in China by tightening global dollar liquidity. It has chosen not to do so, which suggests a far more cooperative stance.
