The FOMC is expected to take a "wait-and-see" attitude during its upcoming meeting this week due to the increasing worries regarding China, the likelihood of a sharp slowdown in the Q4 GDP growth of the US and the renewed decline in oil prices. The US Fed is not expected to give a clear hint whether it has altered its intentions of tightening policy in 2016 even if the central bank is likely to acknowledge the increased threats to the outlook caused by the recent tightening of financial conditions.

The US Fed in its December review meeting had hinted at four 25 bp rate rises in 2016. Hence the central bank is not likely to make any major changes to its forward guidance as it will try to keep its options open. The FOMC statement is expected to indicate a slight downgrade in the central bank's economic assessment.