Tomorrow the Fed is having its interest rate decision meeting. No changes are expected to occur but it will be an important meeting none the less. What many in the markets will look for at the meeting (along with Fed presidents speaking after the meeting) is too see if the recent market movements have seeped into the decision making of the FOMC. The markets are behaving like a hard landing in China and a slowdown in growth are all but certain. But if we look closer to what the Fed is seeing, we may see them come out with more upbeat guidance than expected.
The jobs numbers are still at the full employment mark and even small upticks in this number will not materially concern the Fed in the near term. While the headline inflation number is low, core inflation remain robust and declining oil prices do not seem to be seeping into the core number. If oil prices do start to rise then this will just start to add more fuel to the headline inflation number and eventually core.
The Fed will not want to appear too dovish on the market expectations as this could cause shocks later in the year if inflation doesn't start to represent the gloom the markets are pricing in. On another note if the real economy does start to waver and core inflation declines, the Fed will be forced to act and the whole cycle of easing measures will come back into focus.
Much will (or at least should) depend on the data and less on the market when it comes to future Fed policy.