Fear the talking Fed

HERE'S a breakdown of the confusion created by Fed officials' public comments and how they stir up higher volatility - and more moaning and groaning among investors. Stocks have taken investors on a scary ride for the past few weeks. China and Asian markets as a whole have stirred up a lot of volatility. But perhaps the biggest takeaway is how much "Fedspeak" can impact markets. While it's far from a sign of the apocalypse, it should serve as a cautionary tale as we look ahead to the next several weeks.

New York Federal Reserve president William Dudley's comments last Wednesday have been widely credited with not only stopping the carnage on Wall Street, but actually reversing it and producing a positive week for stocks. Mr Dudley said that recent international events and the stockmarket selloff have made the rationale for raising rates in September "less compelling". He did offer the caveat that the case for raising interest rates could become more compelling in the weeks leading up to the next FOMC meeting.

To add to the confusion, Mr Dudley reiterated that he would like to see liftoff in 2015 and that the data looks mostly positive. But, he added, "let's see how the data unfold before we make any statements about exactly when" liftoff might occur.