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March is off the table.
The FOMC will meet next month to decide whether to raise interest rates.
Deutsche Bank's chief US economist Joe LaVorgna thinks it will pass and wait another nine months before raising rates at its December 2016 meeting.
Here's LaVorgna (emphasis ours):
"We do not expect the Fed to raise rates in March because Q1 GDP growth will likely be very soft, and policymakers will need more time to gauge whether financial conditions will weigh more extensively on economic activity. A rate hike in June or September would probably require growth and inflation to rebound much more than we currently project. Therefore, a rate hike in December seems most likely."
LaVorgna also lowered his expectations for US economic growth and core inflation, now expecting full-year gross domestic product to grow 1.3%, down from his earlier forecast of 2%.
And LaVorgna is not alone. As we noted last week, markets are not pricing in any rate hikes this year and are anticipating the next increase in the second half of 2017.
In its latest Summary of Economic Projections released in December, the FOMC indicated that it expects to raise rates four times this year, or once at every meeting with a scheduled press conference (which includes the March gathering).
But that was back before stocks fell into a correction, credit spreads widened even more, and we learned that economic growth slowed down in the fourth quarter.
When the FOMC meets again, every member will bring refreshed assessments of the economy.
At an MNI event last week, Cleveland Fed president Loretta Mester said, "If the economy's evolution turns out to be different from what we currently anticipate, our policy path may well have to deviate from what our current expectation is ... I don't view this as problematic - we want policy to respond appropriately to changes in the outlook."
And right now markets are betting the Fed will downgrade its outlook significantly enough to keep a March hike out of the question.