Getting monetary policy back to normal after the crash was always going to be difficult, but this is probably more than the Federal Reserve bargained for. Since the start of the year, global equity markets have tanked and investors' mood has soured. What, if anything, should the Fed do?

On interest rates, nothing -- which is what investors expect from Wednesday's policy announcement. On so-called forward guidance, the Fed's message should be, "There's no reason to panic. We will wait and see what happens."

The current turbulence in financial markets has been driven mainly by the slump in the price of oil and other commodities, as well as by fears of an economic slowdown in China. It hasn't derailed the U.S. economic recovery. Conceivably, this could happen: If equity prices keep falling and a vicious circle of mounting pessimism and falling demand takes hold, the recovery might be in jeopardy. But for now it seems unlikely.

The gloom over China is overdone. By any other country's standards, its economy is still growing strongly. Though the fall in oil prices has been disturbingly abrupt, it's not without benefits: Cheaper oil raises real incomes and supports demand in oil-importing countries. And the U.S. economy continues to strengthen.

Until the situation is clearer, the Fed should be neither tightening nor loosening monetary policy. Any rough-and-ready schedule of interest-rate increases that the Fed might have had for 2016 -- a dubious idea in the first place -- can now be set aside.

David Fuller's view

This is sensible advice in my opinion.  Moreover, by backing off from the Fed’s premature forecast in December that US rates could rise four times in 2016, the risk of a further advance in the US Dollar has at least been delayed, hopefully until the global economy is on a firmer footing.