The financial index rose 1.65 percent, led by JPMorgan’s 2.15 percent rise. More households would’ve gone bankrupt, and large financial institutions would have been at greater risk of failure. The increase was slightly less than economists had forecast.

The USA economy is finally dragging itself out of the “great recession”. Then again, there are upsides: The money you have stashed in savings and money markets accounts will earn higher interest. Now more confident about prospects for growth and inflation, policymakers are preparing to raise those short-term rates-perhaps at the conclusion of their two day meeting on Thursday or later this year. So the other path – if we start raising rates a bit and hit the brakes on the economy – Summers says that could be inviting big trouble.

“I don’t think the market is fully pricing in the Fed moving or not”, said Adam Petryk, head of investment solutions at QS Investors, an asset manager owned by Legg Mason Inc. that focuses on quantitative equity strategies.

“The change in the circumstances which began with the Chinese devaluation is relatively new and we are still watching how it unfolds”, Fed Deputy Chair Stanley Fischer said at the end of August.

“We could see some upside in (gold) prices if the Fed chooses to not raise rates, ” said a trader in Hong Kong.

Worldwide Monetary Fund managing director Christine Lagarde has already warned that the Fed should only attempt a rate hike if it is sure the decision will not have to be reversed later. “The markets see this disagreement and uncertainty, and it makes them nervous”, he said.

It seems clear that for all central banks that neutral is lower than what it used to be.

NEW YORK/SAN FRANCISCO – The US Federal Reserve (Fed), this week faces its biggest policy decision yet under chairwoman Janet Yellen. Joseph LaVorgna, chief USA economist of Deutsche Bank, says interest rates are so low that raising them modestly would have a negligible effect on key rates, such as 30-year mortgages.

Minutes this morning from the Reserve Bank of Australia’s latest policy meeting conveyed a neutral tone on the outlook for interest rates.

At the same time, the current surge of blacks back into the USA workforce may signal labour market tightening.

This came after four rate rises of 25 basis points in 2014 in March, April, June and July. But acting amid market turmoil and global economic weakness could jeopardize the six-year-old recovery.

“Last month’s jump from 0.8% to 1.2% had prompted suggestions that underlying inflationary pressures could be building, but today’s drop could provide the Bank with some breathing space to leave interest rates on hold for longer in the face of global concerns”, said Ben Brettell, senior economist at Hargreaves Lansdown (LSE: HL.L – news) .

If the Fed hikes in September as Weber suggests, this would be the first increase after nine years off rock-bottom rates.