Fed's rate hike likely in Q1 16

The October FOMC statement was somewhat more hawkish than expectation. Without a press conference and with only six weeks having passed since the September meeting, it is assumed that FOMC members would be unlikely to have substantially altered their views on the likelihood of a rate hike by year-end. With the committee divided between those who believe a near-term rate hike is needed and those who would prefer to maintain the current level of accommodation for some time. The October statement did not provide a clear path to either December or 2016.

In the event, this month's statement is seen as an active effort on the part of the committee to leave the door open to December. Over the past few weeks, the market-implied probability of a December rate hike moved lower, despite many FOMC members' giving speeches in which they explicitly indicated that a December hike was likely. The FOMC likely believed that it needed a strong signal in the October statement if it was to keep any possibility of raising rates in December. 

"In this vein, we view this statement as increasing the probability of December liftoff; however, we continue to see 2016 liftoff as more likely than 2015. We expect the softening of inflation toward year-end to keep the committee on hold this year. The data over the next two months, especially on inflation and employment, will be critical for determining the timing of liftoff and whether December liftoff is possible. We maintain our March 2016 call", states Barclays.