Tony Ward is president and CEO of Clayton Euro Risk
After last week’s fuss around Super Thursday and the furore surrounding possible rate hikes in the UK, our focus has switched to the US.
The latest robust figures published by the monthly non-farm payrolls report suggest the US economy added 215,000 jobs in July.
While these gains were slightly weaker than expected, analysts said that job gains in excess of 200,000 in both July and August should be enough to prompt the Fed to raise its rates in September.
Paul Ashworth at Capital Economics noted that the headline jobs gain was ‘easily enough to keep the Fed on course’ for September.
Crucially, the report indicated that average hourly earnings rose by 0.2%, producing an annual gain of 2.1%.
Average weekly hours worked rose in July, too; a development likely to boost consumers’ purchasing power.
Only one more jobs report remains before the Fed’s September meeting, which will be scrutinised by the market.
Whether the rate hike comes in September or December, it seems pretty much a done deal it will happen this year in the US.
So what does this mean for the UK? How will it influence the Bank of England?
In my last blog I pointed out that perhaps it would be an error for the MPC to raise rates in the near future with so many unknowns in the pipeline, including the effects of the strong pound and the simmering Greek situation.
So I was pleased to see that Ben Broadbent, deputy governor of the Bank of England, told the BBC last week that he saw no urgent need to raise interest rates after the Bank voted 8-1 on Thursday to keep rates at 0.5%.
He said the Committee had no specific time for a rise and ‘it would be foolish to pre-announce some fixed date of interest rate changes’.
A rate hike, he added, remains some way away.
Whatever happens across the pond next month, for the UK, his comments make perfect sense.