Barry Ritholts writes:  The Federal Reserve says the timing of its first interest rate hike in nine years depends on the data, but that doesn’t mean the Fed will be digging through the jobs, growth and inflation reports for the all-clear signal.

Instead, the Fed will be doing what millions of people have been doing for the past couple of weeks: Watching the stock market.

Many investors have assumed that the recent selloffs in markets from Shanghai to New York meant that the Fed definitely won’t pull the trigger on a rate hike at its Sept. 16-17 meeting.

From 1987 to today, the Fed has reacted to nearly every market hiccough and tantrum by flooding markets with liquidity and reassurances. They’ve given the markets rate cuts, quantitative easing and promises that easy-money policies will continue for a long time, if not forever.  This “Greenspan put” means investing in the stock market is a one-way bet.

New York Fed President Bill Dudley seemed to close the door on a September rate hike when he said that,a rate hike next month no longer seemed as “compelling” as it once did. 

What sort of additional information would make a rate hike more compelling? Dudley said the Fed is looking at more than the economic data, widening its scope to examine everything that might impact the economic outlook. They are looking at the value of the dollar, the price of commodities, the risk of contagion from Europe, from China, and from emerging markets. And, above all, the U.S. stock market.

The market selloff has made a September rate hike even more compelling than it was before, because it gives Fed Chair Janet Yellen the opportunity she needs to kill the “Greenspan put” once and for all.