EU rates to stay low even as US and UK plan hikes

The news from central bankers in the past week suggests that the US Federal Reserve may be closer than markets think to hiking rates, while the Bank of England seems content to wait until next spring before it starts to tighten policy.

The Fed’s Dennis Lockhart, who is seen as a centrist representing the consensus view, said it would take a significant deterioration in upcoming economic data to convince him not to vote for a rate hike in September. His comments followed remarks by another Fed official, James Bullard, that the US is in good shape for a rate hike in September. The markets, however, do not expect the Fed to increase rates until December.

US data last week were generally good, with the ISM services index rising strongly in July to a 10-year high and the new orders component of the manufacturing ISM index increasing for a fourth consecutive month. Meanwhile, last Friday’s key employment report for July was solid, with non-farm payrolls posting yet another 200,000-plus increase and the unemployment rate remaining at 5.3%.