If the Fed would have raised rates back in September it would have strengthened the U.S. dollar making it advantageous from a trade perspective with foreign economies. The only reason the Federal Reserve could have had for NOT raising rates in September was to help the U.S. and European international companies that trade with China, however the Fed’s plan didn’t work because within days of the anticipated rate hike, China responded by devaluing their currency by the largest amount in history which resulted in a positive trade advantage for China. The Fed must have known that they do not have the tools to win this specific battle with China or the rest of the world for that matter, as they devalue their currencies.

I was recently sent the latest TIPS spreads, which are downright scary if you believe the Fed should actually try to hit its inflation target:5 year TIPS spread = 1.34%, 10 year TIPS spread = 1.66%, 30 year TIPS spread = 1.82%. Keep in mind that even if the Fed were on target for 2% Consumer Price Index Inflation, the 30 year spread will usually be a bit over 2%, because long term there is more tail risk of high inflation than deflation. The 1.82% figure is worse than it looks.