Is The Fed Responsible for Global Stability?

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.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza