FOMC rate decision – all about China, EM and noflation

Last night Federal Open Market Committee (FOMC) refrained from hiking rates by 25 basis as was anticipated by quite large portion of financial world. Economists and market participants were well divided.

So what caused FED to be patient?

FED Chair Janet Yellen, provided crucial clues over FED's decision, while the statement wasn't much to chew on.

• According to FOMC (collective view presented by Chair Janet Yellen), US economy is doing pretty well and job gains have been solid, though unemployment rate may not be good presenter of actual slack in labour market. But US economy overall hasn't stopped FED from pulling the trigger.
  
  
• It is more likely that conditions abroad that prevented FED from hiking rates. Financial stress from China and emerging market slowdown has led and may further lead to tightening financial conditions in US, this has been key factor. So FOMC participants likely to watch for further evidence of that dissipating.
  
  
• Another factor has been very low inflation and two key contributor to that has been stronger Dollar which is leading to reduction in overall import prices and lower energy prices, namely crude oil. So FED is likely to wait unless the transitory effects passed.