Does FOMC want to reaffirm a December liftoff?

The FOMC would keep the economic assessment broadly unchanged and avoid references to the recent soft patch in the data. It could remove the reference to "monitoring developments abroad" following the assessment that the risks are nearly balanced. This would be seen as a very hawkish message by market participants.

Sending a strong message in favour of a December liftoff could unwind the recent easing in financial conditions and we do not think that the Fed will want to take that risk. 

On the other hand, the FOMC may want to send a more reassuring message with respect to the growth outlook than it did in September. In effect, the Committee is stuck between a rock and a hard place, risking tighter financial conditions on the one hand or being a source of uncertainty on the other. 

"The statement is expected to be somewhat hedged. This could involve a combination of a relatively upbeat economic assessment which focuses on the cumulative labor market improvement and solid domestic demand", says Societe Generale. 

At the same time, the statement is likely to retain the key references to international developments. An outcome along the lines described above would be consistent with the assessment that the probability of a December is around 40%. 

"Although now the odds are seen tilted in favour of a 2016 move, a December hike is still a possibility. In a perfect world, the data will improve notably over the next 1.5 months and this will push the market to increase the implied probability of a December move", added Societe Generale. 

Fed officials could then pile on with 'open-mouth' operations to push those expectations further. Yet, such favourable scenario could still be derailed by a debt ceiling standoff of a possible government shutdown.