Five concerns of FED

FOMC to announce its policy meeting tomorrow at 6:00 GMT, followed by press conference at 6:30 GMT. While market awaits the decision, FED has tons to deal and debate with.

Low inflation -

• Inflation has remained low since the financial crisis. In spite of pickup in inflation expectation actual rate has remained well anchored below FED's target of 2%. Latest data even point towards further fall as lower energy prices sip in. Wage growth has not improved much since 2010 and remains anchored to 2% level.

Housing -

• US housing market remains much weaker and far from reaching a reasonable level if not pre crisis boom. Recent data suggests that housing is weakening once again. Today housing starts fell to 0.897 million from previous 1.081 million.

Dollar -

• Dollar is showing extreme strength and is getting the fuel not only from policy easing by ECB and BOJ but also from FED's own view to hike rates. Higher rates of dollar reduces competitive advantage and dampens inflation.

Global easing -

• Number of countries easing policy are way outnumber the hawkish ones. ECB bond purchase along with BOJ is sending ripples across markets. FED could become the odd one out among globe.

Expectation divergence -

• FED participants in December were expecting a rate hike of 1.5% by end of 2015, whereas market was hardly pricing more the two 25 basis points at max. Rates have firmed since then along with drop in FED forecast, but still a divergence of 50-70 basis points exist in the forecast.