The Fed's conditions for lift-off include further progress on the labor market, steady or rising core inflation and confirmation that the Q1 slowdown in GDP was transitory. Importantly, a pickup in wage growth is not a pre-condition as stated explicitly by Chair Yellen. Recent comments from William Dudley and Stanley Fischer suggest that key Fed officials are already comfortable with the state of the labor market, and It is believed that today's data will do little to alter that perception. Inflation data has also been in line with the conditions outlined above.

The only question mark was the activity data, but recent evidence has significantly eased the concern about the Q1 slowdown. Forecasts for Q2 GDP growth is set to clock in at 3.3%. Although this is stronger than most tracking estimates, expected monthly figures for June to show further acceleration in activity. Importantly, the FOMC hurdle on GDP growth appears to be quite low.

"The Fed's 1.9% GDP forecast for 2015 implies a 2.5% average during Q2-Q4, and It is expected that this hurdle will be easily met in Q2 and exceeded by a wide margin in Q3" estimates Societe Generale

In this context, it is expected that the FOMC would find a compelling case for lifting rate. Continued disappointments on wage growth could subsequently slow the pace of tightening relative to the "dots", but as an important factor in the lift-off decision.

One important caveat to September rate hike is Greece. Our European colleagues see the probability of a semi-stable solution for Greece at 60%, with a 40% chance of a Grexit scenario. If the latter outcome becomes reality, the probability of a September hike would decline rapidly. Ultimately, the Fed's decision will be driven by the degree of tightening in global financial conditions and by the extent of the dollar's strength says Societe Generale