Excellent time to join #FreeTheFed campaign

THE US Federal Reserve conspicuously failed to raise interest rates in September. It did everything else it was supposed to do. The Fed signalled that quantitative policy would not change. The Fed guided that future rate changes would be slower than normal. It is just that somewhere in the process the Fed forgot to raise interest rates.

The failure to raise rates was bad enough, but the language used to communicate the "logic" of its decision was even more troubling. The Fed implied that market volatility had helped to prevent a rate increase. This is a frightening reason, implying as it does that the Fed is now held hostage by the financial markets.

If we take this to the extreme, the idea that an equity trader in Shanghai could press the wrong button on his computer and as a result of the ensuing market volatility could cause economists to have to change their forecasts for US interest rates inverts both logic and the natural order of things. Markets should not dictate to economists, ever. Economists should lead, and markets should follow at a respectful, reverential distance.