Fed's all doors likely to be kept open

Recent Fed comments have underlined the divergence in views on monetary policy within the FOMC. In particular, the two board members Lael Brainard and Daniel Tarullo delivered dovish comments in their speeches two weeks ago, suggesting they did not see a rate hike coming before next year. 

On the other hand, vice Chair Stanley Fischer and Janet Yellen herself reiterated this month that they think a rate hike later this year is appropriate contingent on economic developments. 

On top of this, the minutes from the Board of Governors' discount rate meetings revealed that eight out of the 121 regional Fed banks advocated an increase in the discount rate at the September FOMC meeting, a signal that they would favour an increase in the fed funds rate as well. 

"However, this request was not met by the Fed Board. This shows the current divergence within the FOMC and we believe that more data is needed before consensus can move in either direction. Thus, any change is not expected in policy and the intention for the October FOMC statement is in our view to keep the door open for a December rate hike but to signal that it is by no means a done deal", says Danske bank.