U.S. Federal Reserve Dithers on Rate Hike as Markets Throw Tantrum

At IBD, "Fed Dithers On Hike As Emerging Markets Throw Tantrum":

The global market sell-off intensified Friday as investors digested the growing disparity between economies poised for expansion and those at the mercy of global headwinds.

Turbulence is accelerating as the Federal Reserve steels itself for its first interest-rate hike in nearly a decade.

Emerging markets are taking the brunt of the sell-off, partly in anticipation of Fed "liftoff," but commodities and debt from oil-dependent countries have also been hit hard. The iShares MSCI Emerging Markets ETF (ARCA:EEM) tumbled to a six-year low Friday. The Shanghai Composite sank 4.4% after a Chinese manufacturing index hit a 77-month low....

As the turbulence accelerates, it raises a critical question: How can the Fed pull the trigger in such an unsettled environment?

Central bank policymakers were asking the same question at their July meeting, minutes released Wednesday revealed.

"Some participants also discussed the risk that a possible divergence in interest rates in the United States and abroad might lead to further appreciation of the dollar, extending the downward pressure on commodity prices and the weakness in net exports," the minutes noted.

Back in May 2013, a suggestion from then-Chairman Ben Bernanke that the Fed would begin to taper its bond-buying program roiled emerging markets. Amid this "taper tantrum," policymakers delayed the start of winding down quantitative easing that September. The Fed finally pulled the trigger on the taper in January 2014.

The Fed in July clung to its assertion that it would be ready to hike at any meeting when economic data offered a critical mass of evidence for higher rates. The minutes repeated policymakers' belief that inflation would get back to their 2% target "as the labor market improved further and the transitory effects of earlier declines in energy and import prices dissipated."

Note that this report came out Friday. This morning's news makes things that much more urgent. See, "How the Market Rout Is Turning Wall Street Upside Down."