FOMC: Looking for guidance amid headwinds

In our view, the FOMC will need firm leadership within the committee and clear communication with the public over the next several months as it weighs improving data against mounting headwinds of uncertainty created by the resurgence of the Greek debt crisis and a relentless decline in the Chinese stock market.

Even if financial markets remain resilient, the FOMC will likely continue to fret about the possibility of a sudden shift in sentiment given its persistent concerns about market complacency.

Financial contagion from the Greek crisis has been muted, so far. Spreads on Spanish and Italian bonds are well below the levels that contributed to the Fed's decision to embark on QE3.

At current levels, we would expect the FOMC to look through the turmoil to the pace of US activity, which is accelerating at a rate that we would ordinarily consider sufficient to keep the FOMC on track for a September hike. In our view, only a sustained rise in volatility or a substantial tightening of US financial market conditions would be sufficient to push thefirst rate hike into 2016, says Barclays.