I am not going to get into any sort of argument over Phillips Curves or the sociology of the Fed or whatever. We know that many at the Fed have gone out on a limb wanting to raise rates to "return to normal," which has not been here since sometime in 2007 or at the latest 2008. Yeah, getting to be a long time, a possible new normal. Understandable they would like to get out of the rut, but then we have China blowing up and all the markets going blooey. I am not remotely going to try to forecast what they will do in a couple of weeks, although I note that Janet Yellen did not go to Jackson Hole, and I suspect she is not sleeping as well as usually...
So, I think there is a deeper hidden issue here that some at the Fed are in fact aware of, although I do not think that it is a major factor in the immediate considerations. It has to do with the funding of the retirement of the baby boomers, many of whom are planning to cash in this or that accumulated asset account into an annuity. How nice. The problem is that the sources of funding by the companies providing for them are heavily dependent on bonds. Many of them have been holding long term bonds from way back, with the interest on those bonds far above what is out there right now for when they must eventually refinance. There has been little publicity about this and how without interest rates moving up noticeably sometime in the near future, these companies are going to come under serious pressure within the next few years as their longer term high yield bonds mature. There are serious people aware of this, but, if in fact the Fed cannot get those interest rates back up somewhere near where they were some decades ago, the retired baby boomer rentiers-to-be may find themselves fulfilling Keynes's old wish that they be euthanized, or at least have to struggle to make up for a much lower income out of their long-accumulated savings than they thought they would get.
PS Added 9/6: Obviously this is a longer term issue and is highly unlikely to be playing much role in what is coming up at this next FOMC meeting. There are obviously reasons why they may put off the rate increase, with the rising value of the dollar against nearly all other currencies perhaps being the issue that really puts it off. Stock market volatility is one thing, but the forex rate of the dollar is much more serious.