Coming on the back of a tumultuous August, it serves to underline growing worries about the outlook for global growth driven by concerns over China. These concerns have been exacerbated in recent months by worries about the impact of a Fed hike on these markets in light of what happened during the 2013 ‘taper tantrum’.
Indeed, earlier this month the IMF issued a note expressing concerns about the outlook for global growth. Noting especially that that the volatility alongside weaker capital flows and falling emerging market currencies has led to greater downside risks, it warned against too quick a rate rise.
It is partly for these reasons and, in particular, the worries over slowing Chinese growth, that the Bank of England’s monetary policy committee choose once again to put rates on hold.
As Ben Brettell, senior economist at Hargreaves Lansdown put it: “If the BoE only considered domestic factors, the decision might well have been more finely balanced. With economic growth and the labour market recovery looking healthy, if unspectacular, the case for higher rates is strengthening – despite inflation remaining close to zero. However, it is global conditions which are concerning policymakers and tipping the scales in favour of inaction.”
