[this was my commentary before the surprising October payrolls]

Despite my better judgement, I was listening to CNBC on Wednesday after the FOMC statement was released. One of the commentators said something to the effect of “the change in wording regarding the next meeting was not very relevant.” I could not disagree more. Not only did the FOMC insert “at the next meeting,” they changed “how long to maintain [the current target range]” to “whether it will be appropriate to raise [the target range].” You need to have a serious reading comprehension problem to think this was NOT a signal from the Fed to the markets that a rate rise is coming.

Yellen is very deliberate with her communications. If you are in the camp of the CNBC commentator, you need to ask yourself, “why now?” If the old and new phrasing are “equivalent,” the Fed could have made this change at any time in the past 6 months. While market volatility has stabilized, the economic data is currently turning south. There was no need to make any change to this part of the statement. But they made the change! Watch for the next Fed Minutes in 2.5 weeks. There is a chance it may validate my interpretation of the statement change.

The next two payrolls will be critical, but it appears that most economists think payrolls will rebound and the UR will continue to drift lower. Under these circumstances (the next two payrolls being similar to the current consensus), the Fed will most certainly hike in December. But as previously mentioned, economist estimates tend to be sticky, so we need to see how the data actually evolves. Even if the data stays around the current levels (and no noticeable improvement), the Fed is better than 50-50 to hike in December.