Bank Of England Steps Back From The Ledge

"Monetary policy must continue to balance two fundamental forces - domestic strength and foreign weakness"

So says Bank of England governor Mark Carney as the BOE Monetary Policy Committee lowered both economic growth and inflation forecasts.

So the Bank Of England will not be raising rates anytime soon.

Is that because the potential fall-out and volatility from a Fed rate increase in December (now given a 58% chance) is adding to concerns over what happens in the emerging economies where the BOE has placed a higher risk of a more abrupt slowdown?

Will the Bank Of England's decision be a factor in the Feds next decision?

Fed chair Janet Yellen has stated that a December rate increase is still on the table.

Tomorrow is US Employment Data Day (October data) and may figure in to that decision so financial markets will be watching closely.

• The headline (Non-farm Payroll) number is expected to have grown by 180,000 to 190,000.
• The unemployment rate is expected to have slipped to 5.0%.
• Average Hourly earnings to have grown by +.2%.
• But the participation rate to have remained at a multi-decade low of 62.4%.

In Canada the Labor force survey is expected to show an increase of 10,000 new jobs.

A "diverging" global monetary policy could cause more volatility said Mohamed El-Erian, chief adviser to Allianz and chair of President Barak Obama's Global Development Council in an article in the financial Times of London earlier this week:

“Together with pockets of concern about the consequences of a less united and less market supportive central banking community, that is likely to trigger more frequent bouts of heightened equity market volatility.”

So, is the Fed preparing us for more volatility?

or will they step back from the ledge as well?

Maybe it is not so "built-in" as some might suggest.

Stay tuned!

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