Last week, the case for raising the Fed Funds rate in September was reopened. Mr. Stanley Fischer, the Fed’s number two guy, blamed the “..change in circumstances which began with the Chinese devaluation..” for the Fed’s change of heart. Mr. William Dudley, New York Fed President claimed that the case for raising rates had grown “less compelling” in the wake of market tumult.

Faithful journalists at the WSJ, casting about for some solid economic underpinnings to support this change in policy thinking, blamed “China’s economic slowdown.” But, let’s face it – China’s economy has been slowing down since 2010 and the most recent bout of deceleration began in Q3 2013. If it were China’s economic slowdown that was upsetting the monetary tightening applecart, it would have surfaced as a factor months ago. In isolation, even China’s devaluation, a modest, controlled 3% over two days surely would have been overlooked if it had not been for the accompanying market reaction.

No, it seems to be not so much economic deceleration or tweak in the forex rate as a Chinese stock market in free fall that has caught the attention of the good folk of the FOMC.

The fact that the Chinese stock market shot up like a rocket during the first half of 2015 and now appears to be merely regretting that impulsive move and correcting back to where it was, is being studiously ignored by media commentators and FOMC members alike. Equity markets, apparently, are only relevant to interest rates when in rapid descent.

The other equity market causing concern, according to Mr. Fischer, was, of course, our own. And the members of the Fed admitted this quite freely last week. Mr. James Bullard (President of the Federal Reserve Bank of St Louis) declared he ”…was willing to respect volatility in the markets.. ” Mr. Fischer himself said “If you don’t understand the market volatility…it does affect the timing of a decision you might want to make.”

So, let’s see if we have this straight. GDP growth gets revised up to a dazzling 3.7% in Q2 2015 and the Feds breeze past that weighty (at least in times gone by), all-encompassing number, and all the other numbers they have presumably been gathering, to focus on the fickle equity market. Which, of course, is going down, otherwise it would not have been noticed in the first place (see above).

Such evidence suggests to us that for Ms. Yellen’s data-driven FOMC, one particular sort of data towers in importance above all other sorts of data. And that data is the equity market. Or rather markets. Ours, China’s. Really, any large country’s equity market could qualify (we feel certain) as long as it was falling sharply enough.

This protective, almost motherly, focus on equity markets seems wrongheaded to us. For a start, equity markets are jumpy things. Like small children, they are always running ahead of themselves and getting scared out of their wits. They are creatures of emotion, very loosely tied to the economic fortunes of the companies whose stock prices they quote. Of course they are volatile. This should come as no surprise to the seasoned economists at the Federal Reserve.

To give this immature data-point, which barely deserves to be included in the discussions to determine the Fed Funds Rate, precedence above all other data-points seems to us to be, at the very least, ill-advised. To continue with our child metaphor, it would be like allowing the 2 year old to decide where the family is going to go on vacation.

More disturbing still is that making a rise in interest rates contingent upon a stable stock-market could be construed as that mother of all moral hazards, viz. propping up the market. Isn’t that what we keep telling China’s authorities they are not supposed to be doing?

Including asset price behavior – especially that of houses and equities – in the analysis that goes into determining the correct level of short term interest rates seems eminently sensible to us. Allowing wiggles in the equity market, at the drop of a hat, to override this considered analysis seems very much less so.