US FOMC: On Hold In October, Hints December Possibility
§ The Fed again kept its ultra-low rates policy unchanged in October but surprised markets with specific reference to "whether it will be appropriate to raise the target range at its next meeting", putting the December FOMC firmly as a live possibility for the first Fed rate hike in nearly a decade.
§ The Fed upgraded its outlook on US household spending and business fixed investment but was less upbeat about the US labor market. The other surprise in the October FOMC was the removal of the direct reference to global developments restraining US growth and depressing inflation. Fed's US inflation outlook remained mostly unchanged in October.
§ The October FOMC further cements our expectation for the first Fed rate hike to take place in the 15-16 December 2015 FOMC and we still forecast the FFTR to reach 0.5% by end 2015, and 1.5% by end 2016. The concerns about the US government debt ceiling and another US government shutdown have abated, and the immediate focus now is the prelim US 3Q-2015 GDP (29 Oct) and the October US Labor Report (6 Nov).
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