Has the U.S. Federal Reserve become the world’s economic guardian? The central bank’s decision not to lift interest rates this week because of weakening global growth and a recent surge in market volatility has sparked talk of a “third mandate.”
Analysts say that explicit references by the Fed following its meeting on Thursday to the China slowdown and its impact mark a significant departure for the central bank, which is mandated to ensure job creation and price stability in the U.S. economy.
“The Federal Reserve’s third mandate appears to be global financial stability,” Mark Haefele, global chief investment officer at UBS Wealth Management, said in a note.
“The U.S. central bank has backed away from its first rate rise in over nine years, saying that international economic and financial weakness could dampen activity in the U.S.,” he said.