Impending rate cuts leave Bailey with little 'ammunition' to fight sluggish UK growth

Bond markets price in prospect of a 25bps rate cut

Incoming Governor of the Bank of England (BoE) Andrew Bailey will have little capacity to combat sluggish growth when he takes over in March, with the anticipated interest rate cut at the end of January unlikely to kick start the UK economy, experts have warned.

Bond markets are now pricing in a two-thirds probability of a 25bps rate cut at Mark Carney's last Monetary Policy Committee meeting on 30 January, after it was revealed last week UK growth fell to its weakest rate since November 2012 as core inflation fell to its lowest level in three years. MPC members Jonathan Haskell and Michael Saunders have previously voted for a rate cut, and Carney, Gertjan Vlieghe and Silvana Tenreyro have all said this month that they are actively considering voting for a cut. If they do so on 30 January, this would give a majority vote for a cut. Despite...