Tuesday, September 15, 2015

WSJ: "For the Fed, Markets May Be Flashing a Wait Sign"

by Bill McBride on 9/15/2015 03:23:00 PM

First a quote that is probably correct ...

"I suspect way more economists than traders think the Fed will go this week. While way more traders than economists think the Fed should." Joseph Weisenthal

This is an important point from Greg Ip at the WSJ: For the Fed, Markets May Be Flashing a Wait Sign

The Federal Reserve owes no allegiance to the stock market. Its responsibility is to the actual economy—employment, output, inflation.

But sometimes, markets send the Fed important signals about the actual economy, and this may be one of those times.

As Fed policy makers ponder Wednesday and Thursday whether and when to raise rates, an important factor in their decision will be whether to wait to see if the recent turmoil in stocks, bonds and currencies points to unanticipated troubles in the global economy.
The Fed isn't directly concerned about market volatility. However they would be concerned if the volatility signals economic weakness.