This is what it sounds like when doves cry. By the time the Federal Reserve announced that its target interest rates would not, after all, be rising this month, it came as little surprise. But its reasoning did, and means that investors’ focus will move ever more urgently towards China.
Futures markets implied that the chance of a rise had dropped to only about 30 per cent. This was largely because of the shocks from China over the summer, as Beijing was widely held to botch its reaction to a stock market fall and its decision to allow its currency to devalue, while evidence mounted that its economy was slowing seriously.
What was surprising, and disconcerting, was that the Fed in its official statement, and its chair Janet Yellen in her subsequent press conference, were quite so candid about this. For obvious diplomatic reasons, China was never mentioned. But the Fed nevertheless made as clear as possible that events in China had caused it to stay its hand, and could continue to do so.