All but one of 55 economists surveyed by Bloomberg last week are convinced the Federal Reserve is too spooked to increase the benchmark interest rate at their Oct. 27-28 gathering. So what hurdles must the U.S. economy surmount over the next two months in order for policy makers to justify a rate hike at the following meeting in December?
Jeremy Lawson, chief economist at Standard Life Investments Ltd. in Edinburgh, has a checklist in mind:
1. No further market volatility
China's surprise move in August to devalue the yuan sent markets reeling, leaving economists, investors and policy makers to weigh whether the volatility was masking deeper concerns about a global growth slowdown.
While Fed Chair Janet Yellen noted in the press conference after the officials' September meeting that the fluctuations were worth monitoring closely, the minutes of that gathering released Oct. 8 revealed that "many" participants considered their likely impact on economic activity as "small or transitory."
Lawson said the Fed needs to remain confident that emerging-market growth "isn't about to step down in a big way."
"There's a lot of bearishness about emerging markets at the moment — I think they're in for a long structural adjustment," he said. "But it could well just be that markets have over-reacted to the fundamentals."
2. Two healthy payrolls reports
The Fed will have two more payrolls reports in hand before the December meeting, and while August and September jobs data were big disappointments, economists have been warning for some time that the pace of hiring will have to slow as the labor market moves toward full employment. Otherwise, the jobless rate would drop to levels that would be too low to sustain without spurring inflation.
"Trend labor force growth is very low, so you don't need payroll growth around 200,000 a month in order to bring the unemployment rate down over time," Lawson said. "It depends on how that employment is combined with growth."
While it would be problematic for the Fed to establish a threshold for job gains around which they could hike, advances between 100,000 and 150,000 would be acceptable as long as growth remains in the 2 percent range, he said.
3. Ongoing solid consumer spending, housing improvement
Turmoil in financial markets could be discouraging some consumers from shopping sprees. Persistently low inflation, though, has helped Americans build on savings — a good omen for consumer spending prospects. The household purchases merit heavy attention as they make up the biggest part of the U.S. economy.
In housing, Yellen has highlighted the pace of groundbreaking as a trouble spot for a housing market that's still "very depressed" since the downturn. However, other indicators are showing more promise. The combined monthly sales of previously owned and new homes are on an upswing this year, buoyed by historically low mortgage rates and still-constrained inventory.
4. No further deterioration in exports
Strong dollar appreciation and diminished prospects for a pickup in growth abroad, led by a slowdown in China, have weighed heavily on U.S. factories this year.
The sluggish sales to overseas customers have added to worries that global demand is starting to take some steam out of American growth. Yellen emphasized after the Fed's September meeting that turmoil in the world's second-largest economy and other emerging markets have already tightened financial conditions and could have a broader domestic impact.
5. No protracted government shutdown
A brief stop in government operations due to Congressional tangling over the debt ceiling probably won't have much of an impact on the economy. Growth actually picked up in the fourth quarter of 2013 amid a 16-day partial closure. Economists including Nariman Behravesh, chief economist for IHS Inc. in Lexington, Massachusetts, have said a shutdown this year would reduce gross domestic product by only about 0.1 percentage point per week.
Anything longer could complicate Fed plans to raise interest rates, even if it doesn't scar the economy. While Yellen said the prospects for a shutdown "played absolutely no role" in their decision in September to hold off on a rate hike, Congressional gridlock could "endanger" progress in the more than six-year expansion.
6. More signaling from Fed officials via "forward guidance"
Lawson said he believes all the factors swirling around the Fed's decision demands clearer communication from officials. More speeches before the Dec. 15-16 meeting could help signal that the Fed is serious about a rate hike this year.
"I would definitely expect a very clear statement from somebody close to Yellen in November if that was still a strong possibility that they're raising," Lawson said. "The only other way that the market is going to adjust is if the data is really strong."
Already on the agenda: Fed Vice Chair Stanley Fischer speaks Nov. 4.