“The Fed’s biggest nightmare, per the new language about events in the global economy and financial developments, is that China will devalue again and export deflation to us and the rest of the world,” East said.
But that doesn’t remove the possibility of an October rate hike. The Fed could become more confident in the domestic picture — another rise of at least 0.2% in average hourly earnings would help — and the Fed may be heartened if commodity prices show some upward move.