Federal Reserve's decision based on global volatility, low inflation, BBVA Compass economists say

- Rate hike could still come in 2015, they note, most likely at final meeting in December

- Dovish Fed projections suggest slower pace than previously expected on rate hikes

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Sep 18, 2015, 12:06 ET

HOUSTON, Sept. 18, 2015 /PRNewswire/ -- The U.S. Federal Reserve's decision not to raise interest rates was most likely based on the latest financial market volatility and below-target inflation numbers, BBVA Compass economists say in their latest report.

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"Based on the Fed's statement, the latest spillover from China's market crumble has clearly spooked some among the committee," writes BBVA Compass Senior Economist Kim Chase. "Fed members were also likely considering the appreciation of the U.S. dollar and the possibility that higher rates could intensify the dollar's strength, ultimately leading to further downward pressure on inflation."

While there were a variety of arguments in favor of a rate hike — such as the 5.1 percent unemployment rate, the lowest since May 2008 — recent shifts by a few Federal Open Market Committee (FOMC) members about the appropriate timing for a monetary policy change gave clues that dovish views had begun to dominate the committee, the report notes.

The FOMC could still raise interest rates in its December meeting, and we will likely have a better understanding of what the members are looking for in the minutes from Thursday's meeting, writes Chase, which are expected to be released on October 8.

"For now, we can assume that for the Fed to push toward liftoff, inflation needs to start picking up a bit more, in addition to stronger vibes from the global economy," said Chase.

To read the full report, click here.

Led by BBVA Compass Chief Economist Nathaniel Karp, the bank's research team analyzes the U.S. economy and Federal Reserve monetary policy. For its analyses, the economists create models and forecasts for growth, inflation, monetary policy and industries. The economic research team also follows a variety of issues that affect the Sunbelt states where BBVA Compass operates.

Follow their work on Twitter @BBVAResearchUSA and @BBVACompassnews

About BBVA Group

BBVA Compass is a subsidiary of BBVA Compass Bancshares Inc., a wholly owned subsidiary of BBVA (NYSE: BBVA) (MAD: BBVA). BBVA is a customer-centric global financial services group founded in 1857. The Group has a solid position in Spain, is the largest financial institution in Mexico and has leading franchises in South America and the Sunbelt region of the United States. Its diversified business is geared toward high-growth markets and relies on technology as a key sustainable competitive advantage. Corporate responsibility is at the core of its business model. BBVA fosters financial education and inclusion, and supports scientific research and culture. It operates with the highest integrity, a long-term vision and applies the best practices. The Group is present in the main sustainability indexes. More information about the BBVA Group can be found at www.bbva.com.

About BBVA Compass

BBVA Compass is a Sunbelt-based financial institution that operates 672 branches, including 341 in Texas, 89 in Alabama, 77 in Arizona, 62 in California, 45 in Florida, 38 in Colorado and 20 in New Mexico, and commercial and private client offices throughout the U.S. BBVA Compass ranks among the top 25 largest U.S. commercial banks based on deposit market share and ranks among the largest banks in Alabama (2nd), Texas (4th) and Arizona (5th). BBVA Compass has been recognized as one of the leading small business lenders by the Small Business Administration, and its mobile app recently earned the Mobile Banking Leader in Functionality Award for the second consecutive year from Javelin Strategy & Research. Additional information about BBVA Compass can be found at www.bbvacompass.com, by following @BBVACompassNews on Twitter or visiting newsroom.bbvacompass.com.