The three factors that will prompt an FOMC rethink

A preview of the Federal Reserve's Federal Open Market Committee (FOMC) monetary policy meeting on January 27 from UBS economists

UBS say there is only so much that the Fed can put up with.

I'm paraphrasing the client note ...

• GDP on the slow side - OK
• Financial market volatility - OK
• Headline inflation on the soft side - OK

BUT ... put them all together and the FOMC will be throwing its hands in the air and screaming 'Enough already'!

Yes, the Fed can accept all three, but not at the same time. While there is very little expectation of action at this week's meeting, if all three are still pertinent in March it will prompt a rethink on the pace of policy tightening.

On the side arguing for continued tightening is labour market strength and core inflation holding up.