Fed script on inflation may have to change
China-led swings in financial markets suggest solid growth and payrolls in the US alone may not boost prices
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WILD swings in world financial markets this week have shown how events in China can potentially disrupt the Federal Reserve's carefully scripted policy plans. The turmoil, triggered by a rout in Chinese markets, also flagged a broader risk that the US central bank may struggle to meet its inflation target until the rest of the world plays along.
As they try to nudge US interest rates away from zero, policymakers might have to rethink a basic assumption that solid economic growth and swelling payrolls at home are enough to do the job even as the world's second-largest economy stutters.
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