Is the U.S. central bank data dependent or data addicted? How much new information will the Fed have in five weeks?
Will the economy be appreciably different? Are new wage and inflation trends suddenly going to emerge before the September meeting?
Central bankers are not teenagers. Coy is not a monetary policy.
The U.S. economic condition is well established--slow growth, moderate job creation, stagnant wages, low inflation and worldwide dis-inflationary pressures. These conditions are not going to change in the next five weeks.
Are their external concerns that could preclude a Fed Funds hike in September? Of course. Here are three:
China could lose control of its equity market and an unimpeded collapse would infect world markets.
Beijing may decide that appearing responsible in the eyes of its trading partners and the IMF is less important than maintaining domestic employment. Further yuan devaluation is accomplished all at once, igniting competitive currency devaluation and exporting deflation worldwide.
The collapse in commodity prices could accelerate, spreading defaults and bankruptcy throughout the overbuilt energy and resource sectors and tabling hopes for a global economic revival.
There is plenty to worry about. Why not just say so? Why does the Fed continue to proffer its tired job and inflation rhetoric when the primary threats to the U.S. economy are international.
Yes, the Fed's responsibility is the health and welfare of the U.S. economy. But in the wired modern world, American inflation, wages are jobs are determined as much overseas as domestically.
If the Fed is to maintain credibility and influence its governors need to match their deliberations and rhetoric to their children's emergent world.
Chief Market Strategist
WorldWideMarkets Online Trading