After a tumultuous month in the markets, all eyes are now on the Fed and what they will, or will not, do at the next FOMC meeting scheduled for September 16-17. It’s an interesting question, and one that has no obvious answer.

If you’d asked the same question a month ago, there would have been widespread consensus that a rate hike was coming, if not in September, then surely sometime before the end of the year. But then China happened. The Chinese economy had been showing signs of distress for a while, with over-capacity in many state-sponsored industries, and a general slow-down in growth and industrial output. China’s problems were a concern, but one that seemed a minor distraction against a recovering American economy.

But that all changed when the Chinese stock market went into a free-fall in August, dragging the rest of the world equities markets with it. The plunging Shanghai stock market also opened a previously hidden window into the workings of the Chinese Communist Party. Until the stock market started to crash, the economic miracle that had been the hallmark of China for more than three decades had always been attributed in large part to the economic acumen of the autocratic Central Government. The plunging stock market seemed to reveal their ineptitude and the limits of any government – autocratic or not – to direct a large and complex economy, as China’s has surely become.

The distress in China, and the reverberations that rippled across the globe in its aftermath, had many analysts convinced that the Fed would keep rates unchanged until the economic turbulence abated. And this was the consensus until the latest jobs report came out, showing that the US economy added another 173,000 jobs in August, and that unemployment had fallen to 5.1%, a seven-year low.

So, what’s a Fed to do? Should they keep rates steady as the world seems to be falling apart all around it? Or should they increase rates now as our own economy keeps chugging along, adding jobs and absorbing sidelined workers at a steady clip?

Good arguments can be made on both sides. The “keep rates the same” camp says that this is a volatile time, and that any increase in rates now could further destabilize the world economy and, ultimately, derail the American recovery. The “start moving rates up now” camp says that the time to increase rates is before there is any real sign of inflation. The steady decline in unemployment, and the consistent hiring that has been occurring virtually uninterrupted since the beginning of 2010, will inevitably translate to inflationary pressures on wages and a spiraling of inflation across the American economy.

For the answer to this puzzle, my friends, we will all have to wait until September 17. My own guess is that the Fed will wait to raise rates until later this year. There are two more FOMC meetings scheduled, so they will have other opportunities before the end of 2015. The Chinese scare is still fresh in everyone’s mind and the panic was real. I’m guessing that the Fed will wait another month before they take any action on rates. But that’s what it is – a guess – no better than yours or anyone else’s. So, just wait two more weeks – we’ll have the real answer by then. Keeps life interesting, doesn’t it?

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