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Tim Duy

The Economy’s Too Robust for the Fed to Bow to Markets

Growth would need to slow to around 1.8 percent before the central bank considers slowing the pace of interest-rate hikes.

Traders are running scared. 

Traders are running scared. 

Photographer: Drew Angerer/Getty Images North America

The nasty sell-off in equity markets has raised doubts about the Federal Reserve’s willingness to follow through with its plan to boost interest rates again in December. It shouldn’t.

The odds that market participants place on a rate hike had dropped to around 65 percent from a high of more than 80 percent a few weeks ago. The decline comes even as central bankers give little reason to doubt that another rate hike is coming. New York Federal Reserve President John Williams, a permanent voting member on the Federal Open Markets Committee, reiterated this week his expectation that the Fed would “be likely raising interest rates somewhat but it’s really in the context of a very strong economy.”