Fed's September rate hike still on the cards

The impact of China and of the weaker oil price complicates monetary policy decisions in both the UK and the US. After its August meeting the Bank of England intimated that a hike in policy rates is now unlikely this year, partly owing to external influences. In contrast, however, the Fed still seems inclined to look through near-term weakness in inflation and raise interest rates this year. 

This week's release of the July FOMC meeting minutes may provide further detail on how close the Committee is to pulling the trigger. Recent data including not only payrolls but also retail sales and the ISM reports all suggest that economic activity is strengthening. However, in making its decision the Fed will have to weigh this against current low inflation and an uncertain international background. On balance, still the Fed is expected to raise rates in September.