China’s stock market selloff is unlikely to slow the Fed’s path to rate hikes, unless it creates an economic slowdown or deflationary spiral that slams the global economy.
The Fed begins its two-day meeting Tuesday, but economists mostly expect little news from the U.S. central bank when it releases its statement Wednesday afternoon. The majority of economists forecast the Fed will raise rates for the first time in September, unless the economic data soften significantly or there is some other shock to the system—and China could potentially create a shock.
“Financial stability matters. If there’s a huge mess and fallout from China that’s destabilizing when they go to raise rates, they’ll have to postpone it,” said Mesirow Financial’s chief economist, Diane Swonk.