US economy probably close to reach Fed's December finish line

Speeches by FOMC participants in recent weeks suggest that the positions taken at the September meeting have not materially changed despite the disappointing Employment Report. If the dot plot is looked at, that would mean an overwhelming majority for a December rate hike. 

When it comes to voting, not all that are opposed will vote against the majority decision. Fed projections have been skeptical for a long time, in fact December 2015 hike expectations were taken back when the Fed and most in the markets believed that the first hike was going to take place by mid-2015.

However, the forecasting horizon is much shorter this time and Fed's desired levels are very close. There is still a very good chance that the economy will reach the Fed's finish line by December.

"Meanwhile, fiscal policy diversions in December are less likely now that the debt ceiling should be raised by November 5. The possibility of a temporary government shutdown if a continuing resolution is not passed by December 11 may not impress the FOMC very much because of its limited and transitory impact on the economy and markets", says Rabo Bank.

The distance between the key economic variables and the Fed's criteria for liftoff should be focussed. The economy is close to the Fed's finish line, and it will take more evidence to convince the FOMC to delay its first rate hike to next year.