Fed keeps interest rates flat (Updates)

Before boosting the rate sometime in the future, FOMC wants to see "some further improvement in the labor market" and more signs inflation is rising toward its 2 percent annual goal; higher rates slow price gains.

The don't-fix-it move at this month's meeting had been widely expected since last month's China stock market crash; Wall Street leaders like JPMorgan CEO Jamie Dimon, Goldman Sachs boss Lloyd Blankfein and former Treasury Secretary Larry Summers had pressed the Fed Not to raise rates.

"It didn't happen today, but it's gonna happen. Our clients are continuing to prepare. It's just a matter of when," Timothy Swanson, head of the $4.6 billion private bank at Citizens Bank, told me. "They thought we weren't ready yet. Two-thirds of economists agree with them."

Critics say a return to more-normal rates is already appropriate, as speculators exploit cheap borrowing to buy stocks at potentially inflated prices and junk bonds at depressed yields, and finance more-marginal real estate developments; they worry the U.S. has become addicted to cheap money and the Fed will have few weapons left the next time the nation faces an economic shock.

But "after the tenor of the announcement it becomes less likely they will raise before December," at least, says Tom Wilson, a managing director at Berwyn-based Brinker Capital, which manages $18 billion for clients,  "The comments from their opening statement were a little more dovish" than investors expected, he added.

Wilson dismissed the idea the Fed would raise rates just to regain the power to cut them again in time for the next economic shock. "They would raise rates to balance" the need for jobs and for stable prices, the Fed's key responsibiliies," he added. "Higher rates will come. But I wouldn't put the fear of the next recession as a reason to raise rates now."

Is the Fed over-concerned with Asian conditions at the expense of purely U.S. concerns? "It's not a bad idea to make sure the Pacific Rim countries are stabilized," so higher impact "won't have an impact on growth here at home," Wilson told me. "We've waited several years, waiting a couple months is not necessarily a bad thing," if that keeps the Fed from boosting too soon, then feeling pressure to cut promptly.

The committee, under Fed chairman Janet Yellen, could still raise rates at the committee's October monthly meeting or, more likely, at its December quarterly conference; or not.