In its quest to find just the right time to raise interest rates, the Federal Reserve seems to have discovered a third mandate: creating a perfect world.
Recent post-meeting statements from the Federal Open Market Committee show that the U.S. central bank has gone well beyond its congressional dual mandate for price stability and full employment. Instead, the Fed now sees global growth as a principal condition for when it will enact another rate hike.
The April statement saw what appeared to be a modest tweak from March, going from an assertion that global issues "continue to pose risks" to the Fed continuing "to closely monitor ... global economic and financial developments."
For some on Wall Street it was a sign that a June rate hike is on the table as global concerns dissipate, while for others it either didn't mean a whole lot or wouldn't be enough to signal that the Fed will make its first hike since December. Along with the vote to raise rates a quarter point, Fed officials then indicated a path — since halved— toward four increases in 2016.
"Bottom line, I'm even more confused as to what factors are influencing them. If the sentence ... on international developments was the reason why they didn't hike in March, what is the excuse this time?" Peter Boockvar, chief market analyst at The Lindsey Group, wrote after the meeting. "All I can say again is that the Fed has and continues to wing it and for all the talk about being data dependent, they've completely neutered the concept because we no longer know what data they are depending on."