At the conclusion of the September FOMC meeting of Fed, the Committee expressed great concern that risks surrounding the growth and inflation outlook of the United States- then still viewed a 'nearly balanced' - could become more skewed to the downside.
Chair Yellen elaborated further on this during the press conference, noting that the Committee wanted to see the uncertainty resolved "to some extent" before deciding to lift rates.
Although financial conditions have eased somewhat since September 17, they have arguably done so for the wrong reasons. There is no new clarity on China, commodity prices or EM currencies. Instead, market participants have assumed a later and slower tightening in the U.S. which has weakened the dollar and pushed equity prices higher.
Against the ultradovish rate expectations currently built into asset prices, it will become more difficult for the Fed to deliver a rate hike this year. Additionally, economic data has softened somewhat since the September meeting. Although the recent soft patch in hiring and in manufacturing activity has done nothing to alter thier economic outlook, it has arguably added to policymakers' uncertainty, says Societe Generale.
