It sounds counterintuitive, but the recent slide on Wall Street will be met with some relief at the Fed as long as it remains a ‘correction’ and doesn’t morph into a panic-fueled rout.

 U.S. financial conditions had become surprisingly loose as the surge in stocks to new highs more than offset the parallel rise in bond yields and the dollar.

By some measures, U.S. financial conditions just before the recent equity selloff were the easiest in almost quarter of a century, a red flag for policymakers concerned about the build up of leverage and risk-taking in the financial system.

The Chicago Fed’s National Financial Conditions Index had fallen to -0.89 in the week ending Oct. 5, the lowest since January 1994. By this measure, the availability of, and access to, financing had never been easier in nearly 25 years.