For the most part, George Magnus (ex-UBS) writes a sensible article and even manages to pose the right questions in the end. But, he ends his note lamely. Here is my comment, posted below his article in FT:
Mr. Magnus poses two questions – one directly and the other indirectly.
The direct one:
(1) “how long should the Fed cite China or emerging markets as a reason for keeping rates on hold, especially if the domestic case for not doing so becomes even more compelling?”
The indirect one:
(2) How long should the Fed continue with financial market stability as the leitmotif of policy-making?
His anti-climatic suggestion:
“The Fed should start telling markets about the difficult trade-offs it faces.”
A better one:
The Fed should act and have the courage to explain to the markets the potential costs of waiting – that it could be worse.
The reason that they do not do it:
Counterfactuals are impossible to establish. They do not have the confidence or conviction or both to make the case.
BIS economists do that. But, the Federal Reserve ignores the men from Basel.