We’re going to be calling the president of the Federal Reserve Bank of New York Dudley-Do-Right if he pulls this off.

William Dudley said Wednesday that the prospect of the Fed raising interest rates in September “seems less compelling” than just a few weeks ago.

Considered a close ally of Federal Reserve Chair Janet Yellen, Dudley is the vice chair of the Federal Open Market Committee, which determines policy for the US central bank. The FOMC’s next policy meeting will be held Sept. 16-17.

Fed's Dudley
Fed’s Dudley

This was the first indication that the Fed is worried that an economic slowdown in China could hurt global growth and remove the reasons for raising rates. For months, the central bank has been hinting of raising rates next month. But that plan appears to be under re-evaluation in the wake of Monday’s global market meltdown.

“At this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,” Dudley told reporters at the New York Fed.

Still, Dudley was far from definite and left open the possibility that if the situation stabilizes, we could still see an increase.

A rate hike “could become more compelling by the time of the meeting as we get additional information on how the US economy is performing and (on) international financial market developments, all of which are important to shaping the U.S. economic outlook,” he said.

Dudley said a final decision would reflect how the market acts over the next few weeks, as well as the end-of-month economic data.

For months now, Asia Unhedged has been saying the rate hike would be bad news. With the price of commodities, especially oil, falling, inflation remains well below the 2% the Fed has been looking for.

Dudley says the Fed will wait till it has more economic data, but Asia Unhedged feels the economy is weaker than most analysts believe and that the second-quarter data will prove this. We’ve been predicting a stock market correction for a while now. With the market very close to correction, an interest rate increase could shock the system in a much more negative way.

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