Well. That was something. Even though the Fed did not move, they did surprise.
Did the Fed just introduce a third mandate?
This is the sentence that had everyone talking: "Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term."
This is a remarkable statement.
Fed Chair Janet Yellen repeated this again during her press conference, specifically calling out slowing growth in the Chinese economy as a factor in their decision and noting the future risk there of "a more abrupt slowdown than some analysts expect."
So the Fed's mandate is: 1) job creation, 2) control of inflation, and 3) everything else (global economic and financial developments)?
Some will argue this is an exaggeration. The Fed is not introducing a third mandate, they are merely acknowledging the interconnection of the global economy. It's all appropriate, some will argue.
And there is certainly a practical consideration: the Fed may not want a stronger dollar, no matter what they say, because of the negative impact on corporate profits.
Having introduced the global economy as a factor in your decision-making, how do you turn this ship around? Do you not raise rates until the Shanghai stock index recovers? What's the criteria for that? Are we also now "data dependent" on Chinese GDP?
There's a real problem when the Fed starts acting as the global banker of last resort.