So with respect to global developments we reviewed developments in all important areas of the world but we have focused particularly on China and emerge markets. Now we have long expected and most analysts have to see some slowing in Chinese growth over time as they rebalance their economy. And they have planned that. And I think there are no surprises there.
The question is whether or not there might be a risk of a more abrupt slowdown than most analysts expect. And I think developments that we saw in financial markets in August in part reflected concerns that there was downside risk to Chinese economic performance and perhaps concerns about the -- the gaps where policymakers were addressing those concerns in addition we saw a very substantial downward pressure on oil prices in commodity markets. And those developments have had a significant impact on many emerging market economies that are important producers of commodities as well as more advanced countries including Canada which is an important trading partner of ours that's been negatively affected by declining commodity prices, declining energy prices. Now there are a lot of countries that are net importers of energy that are positively affected by those developments. But emerging markets important emerging markets have been negatively affected by those developments. And we have seen in significant outflows of capital from those countries, pressures on their exchange rates and concerns about their performance going forward so a lot of our focus has been on risks around China. But not just China, emerging markets more generally and how they may spill over to the United States. In terms of thinking about financial developments and our reaction to them, I think a lot of the financial developments were really -- so we don't want to really respond to market turbulence. The Fed should not be responding to the ups and downs of the markets and it is certainly not our policy to do so. But when there are significant financial developments, it's incumbent on us to ask ourselves what is causing them. And of course while we can't know for sure, it seemed to us as though concerns about the global economic outlook were drivers of those financial developments.
And so they have concerned us in part because they take us to the global outlook and how that will affect us.
And to some extent, look, we have seen a tightening of financial conditions during, as I mentioned, during the intermeeting period.
So the stock market adjustment combined with a somewhat stronger dollar and higher risk spreads does represent some tightening of financial conditions.
Now, in and of itself, it's not the end of story in terms of our policy. Because we have to put a lot of different pieces together.
We are looking at as I emphasized a U.S. economy that has been performing well. And impressing us by the pace at which it's creating jobs. And the strength of domestic demand.
So we have that. We have some concerns about negative impacts from global developments and some tightening of financial conditions. We're trying to put all of that together in a picture.
I think importantly, we say in our statement that inspite of all of this, we continue to view the risks to economic activity and labor markets as balanced. So it's a lot of different pieces, different cross currents. Some strengthening the outlook. Some creating concerns. But overall, no significant change in the economic outlook.
