Below from Warren Mosler's blog now focused mostly on economic indicators and his valuable insight:
The Fed did not raise rates because the FOMC concluded this was not the time to remove accommodation.
I agree this is not the time to remove accommodation. But I do not agree lower rates and QE are accommodative.
Changing rates shifts income between borrowers and savers, and with the federal debt just over 100% of GDP, the state is a large net payer of interest to the economy. So lowering rates reduces interest income paid by the state to the economy. Therefore that aspect of lowering rates imparts a contractionary bias and, yes, raising rates would impart an expansionary bias. In other words, the Fed has the ‘easing’ and ‘tightening’ thing backwards, and if it wants to impart an expansionary and inflationary bias a rate increase would be in order.
Paying more interest, however, does have distributional consequences, as the additional income paid to the economy goes to those holding government securities. Alternatively, a fiscal adjustment (tax cut and spending increase) directs additional spending power to other constituencies. So the remedies for a weak, deflationary outlook come down to some combination of rate hikes, tax cuts, or spending increases.
And given those choices, I think most of us would vote to leave rates at 0 and either cut taxes or increase public spending.