From Goldman Sachs (their economics researchers) preview of the Federal Reserve’s FOMC meeting this week.

In brief (bolding is mine):

US data have generally been solid since the last FOMC meeting, with a few exceptions

  • However, concern about downside risks to global growth increased—echoed by Fed communications—while financial market volatility rose considerably
  • The market-implied date of the first rate hike shifted out by roughly a quarter to 2015 Q4
  • Our analysis suggests that recent developments should have a limited effect on the Fed’s baseline expectation for growth in the near-term, although downside risks to inflation are more pronounced
  • The FOMC will probably acknowledge recent foreign developments in the October statement, but an explicit shift in the balance of risks for the US outlook to the downside would be a dovish surprise
  • Other changes to the statement will likely include a slight upgrade to the language on the labor market

St. Louis Fed President Bullard’s suggestion that QE could be extended past the October meeting garnered a lot of attention, but this seems unlikely to us.

  • First, the September statement included a reference to ending asset purchases at the October meeting, and we think there is a high bar for deviating from this guidance.
  • Second, a larger number of Fed officials have guided toward an end of purchases in October.
  • Third, the Fed’s view of the appropriate path of policy has probably not changed much.
  • Fourth, the Fed would likely prefer to return focus to the path of the fed funds rate as its primary policy instrument

We think the “considerable time” forward guidance will only be adjusted slightly at the October meeting, removing the reference to the end of asset purchases

  • The September meeting minutes suggested that any major changes are most likely at a meeting with a press conference, such as December
  • Subsequent changes to the guidance―whether in December or later―will depend on the degree to which the Committee is comfortable retaining a “time element” in the language.

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I posted earlier on one outlook for the FOMC meeting, here:FOMC – There is every reason to believe “next year’s rate increase won’t materialize”