BoE Monetary Policy: No change but watch for more comments about China

Predicting the outcome of the meeting is straightforward. The committee should leave policy unchanged and the vote should be a repeat of last month's 8-1(McCafferty). In the new publication framework introduced in August, the minutes are published at the same time as the policy announcement which now comes in the form of a "Monetary Policy Summary." 

The surprise at the onset of the China jitters in the markets was to see how insouciant the Governor appeared to be about it. Specifically at Jackson Hole on 29 August, he said

"developments in China are unlikely to change the process of rate increases from limited and gradual to infinitesimal and inert." 

The tone appeared rather dismissive. Yet, less than two weeks later in the minutes of the September MPC meeting, it was stated that 

"Global developments did not as yet appear sufficient to alter materially the central outlook described in the August Report, but the greater downside risks to the global environment merited close monitoring for any impact on domestic economic activity concerns about China and other emerging economies had grown." 

This seems a more realistic assessment of the situation which should in broad terms be repeated in the minutes of this month's meeting. It might be a shade less worried, given that the markets seem to have settled down a little in the intervening period. The underlying concern in the markets is that the slowdown in China might turn into a hard landing and the evidence either to refute or to confirm that hypothesis will only come slowly so the Bank is likely to remain vigilant on this topic for some time yet.