We're about to find out how closely the Fed follows its unspoken rule

The Federal Reserve has a dual mandate: maximum employment and price stability.

But the Fed also seeks to foster financial stability, the unspoken third mandate the Fed has seemed sensitive to in the wake of the financial crisis.

And while this goal is not an explicit mandate, much has been made about how much the Fed will concern itself with this objective, particularly in light of the relative instability we've seen in markets lately.

Currently, the Fed judges the economy can sustain maximum employment with an unemployment rate between 5% and 5.2%. "Price stability" is judged as inflation running near 2% per year. Right now, the unemployment rate is at 5.1%; the Fed's preferred measure of inflation - core PCE - is running at around 1.2% per year.

And so with interest rates currently pegged at 0%-0.25%, where they've been since the financial crisis, the Fed is maintaining a crisis-era positioning and the question hounding financial markets over the last several months is when - and if - the Fed will raise rates.

Looking at its employment goals, the Fed has a strong case to raise interest rates in its policy announcement set for Thursday, September 17. But still sitting shy of its inflation target, the Fed can also make a strong case to keep interest rates right where they are.

Recent events in financial markets, however, have led some economists - including those at Barclays and Deutsche Bank - to abandon calls for earlier Fed action. And these calls are more or less explicit nods towards the Fed's un-mandated but still-mostly-clear goal of ensuring financial stability.

The question, of course, is whether financial stability means ensuring that the biggest banks in the US don't pose a systemic risk to the US and world economy and financial system, or whether financial stability means ensuring unabated price appreciation across financial markets.

Many Fed officials have spoken on concerns of financial stability in recent years, but looking at two speeches from high-ranking Fed officials on the topic is instructive when trying to decode what this really means to the Fed.

Last December, Fed governor Lael Brainard, a voting member of the Federal Open Market Committee (FOMC) which votes on monetary policy decisions, said: "Although its founding statute makes no explicit mention of financial stability, the Federal Reserve was created in response to a severe financial panic, and safeguarding financial stability is deeply ingrained in the mission and culture of the Federal Reserve Board."

Fed vice chair Stanley Fischer in speech earlier this year addressed the problems the Fed faces in ensuring financial stability among nonbank institutions - for example, AIG was perhaps the largest source of instability during the financial crisis - and said that the Fed need be attentive to something that many Americans learned about in panicked conditions back in 2008: liquidity and solvency.

Liquidity concerns questions regarding an institution's ability to gather funds to meet its current obligations; solvency concerns questions about whether an institution could ever meet those obligations.

And so it isn't that questions regarding financial stability are new in the post-crisis Fed, but that amid relative instability - the recent 12% decline the S&P 500 and mixed signals from China, the world's second-largest economy - how committed will the Fed to not upsetting financial markets any further than they've already been.

In a note to clients this week, Joe LaVorgna at Deutsche Bank moved his expectations for a Fed rate hike back to maybe the October or December meeting.

And basically, LaVorgna's argument was that the Fed won't act until the market gives them permission, writing:

Most importantly, the financial markets have to be discounting a reasonably high probability of an interest rate hike. In other words, the Fed will not surprise the financial markets with a tightening in policy. (Unfortunately, this is how monetary policymakers have conditioned the financial markets over the years.)

In other words, we're going to need calmer markets. Or the Fed will.

And when LaVorgna writes about markets "discounting a reasonably high probability of an interest rate hike," he's likely referencing data from the Fed Funds futures market, which indicated this week that markets expect a roughly 30% chance of a rate hike at the September meeting.

This data provides an easily digestible number regarding the likelihood of a Fed rate hike next week, but it also overlooks other measures that suggest markets have already priced in a rate hike.

In a note to clients this week, Sven Jari Stehn, an economist at Goldman Sachs, argued that the market has already done the Fed's "dirty work" for it, as the recent tightening of financial conditions is equivalent to three rate hikes.

Stehn wrote that this will likely keep the Fed on hold until December.

Though under an alternative interpretation, the Fed could raise rates "for free," meaning that it would not, in fact, upset financial markets that are already bracing for a rate hike.

And if you look at measures like the 2-year Treasury note, markets have clearly started to act as if higher interest rates are coming.

Again, though, the case for the Fed raising rates is still mixed. It is not as if the unemployment rate is 0.5% below the Fed's target while inflation is running over 2%: we've just crossed one of the Fed's two thresholds.

But raising rates from a crisis-era stance to a very-slightly-less easy position isn't the kind of thing that should really rock markets. And what's more, the Fed has been clear that it will not be raising rates aggressively once it does decide to move.

The case could be made that even the threat of Fed action is precisely what has created this instability that may make the Fed loathe to act. And this is exactly the "box" folks talk about when they fear the Fed has put itself in an impossible situation it will never get out from under.

But for the last year, however, markets have been bracing for Fed action, and the Fed has made clear rate hikes are coming. The questions about when, and why, still remain stubbornly out of reach.