It's the Fed, but the world will have its say

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The U.S. Federal Reserve has a purely domestic mandate, answerable to an elected Congress and facing nearly daily demands from an outspoken president.

But the fate of recent Fed policy decisions may have been written far outside the borders of the United States. As much as officials felt they could raise interest rates last year because U.S. economic conditions seemed ripe for it, the about-face in the last few months has shown just how bound the Fed has become to the rest of the world.GRAPHIC: The weight of the world on the Fed - https://fingfx.thomsonreuters.com/gfx/editorcharts/USA-FED-JACK/0H001QER57ZD/index.

Whether it was China's choice to battle President Donald Trump's trade war on a tit-for-tat basis, foreign companies' dependence on cheap dollar debt, or European and Japanese officials' inability to get their economies off the mat, external forces ultimately proved too much for the Fed.After a fitful, three-year rate hiking cycle, the U.S.

The Fed, in that environment, isn't free to choose its targets without factoring in the wider world, or act without understanding whether other countries will be impacted in ways that would ultimately hurt back home.

 

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