• The overall economic data released since Fed's latest meeting suggests the criteria for liftoff has been met.
  • However, headwinds from the recent developments abroad and tightening of financial conditions in the US will likely postpone the first hike.
  • The Fed has not elaborated upon the way it sees the balance of risks -- so we're flying blind.
  • The key rational for believing a hike will be delayed is that the Fed has not provided any 'heads-up'.
  • Charts below: dollar, commodities, financial conditions.

Charts

US trade-weighted dollar is higher than earlier in the year, when Fed warned about its negative consequences to the economy

Oil prices are also back to the lows of earlier this year

Retail gasoline prices are not at the lows but have trended down since July

Commodity prices have just made new lows


US equities are 7% down since mid August

Equity vol off the highs but still elevated

US 10y Treasuries

Baa spreads widened materially vs Aaa

Market-based inflation compensation sharply down, but this could just be oil prices

Financial conditions, as measured by GS, have already tightened sharply in 2015...

...but broadening the definition to include oil prices show a more benign picture

Financial conditions, as measured by the Chicago Fed, also show a tightening, but overall levels remain in the accommodative range

Adjusting for the business cycle, Chicago Fed index suggest that financial conditions moved to tight since the beginning of 2015

Below, some additional financial conditions and financial stress indices