So, apparently, a December interest rate increase remains an option:
In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.
Meanwhile the US Commerce Department announced the most recent data on 3rd quarter GDP which came in at an annualized 1.5% (vs. an expected 1.7%).
On a year over year basis, which smooths out the quarter to quarter volatility, this is a 2% rate of growth.
Hardly robust, but "moderate" according to the Fed.
Inflation readings continue to show below target readings, so the key data will be the impact on employment.
The first Q4 indication will come on November 6th's Employment Situation Report. While the data is often revised significantly, there will be a great deal of focus on it by financial markets as the Fed has stated that:
The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.
Currently, it is expected that Non-Farm Payrolls grew at 177,000 in October.
The debate will be if this actually represents "improvement".
Speculation at the moment is that anything better than 150,000 is "improvement".
In the interim, regardless of what the Fed does, global economic conditions are not improving, earnings are declining and expected to decline further.
Caution is warranted.
Scott Tomenson,CIM Managing Partner, Chief Investment Strategist