Interest rate cut should be Mark Carney's leaving gift to his successor

Commenting ahead of the Bank of England's interest rate decision due on Thursday, Joe Brusuelas, Chief Economist at RSM US said: 

'We expect a close call within the Bank of England Monetary Policy Committee on the policy rate decision at its upcoming January 30 meeting. 

'In our estimation, the MPC should cut the policy rate by a quarter of a percentage point to bolster a sagging domestic economy that has been starved of fixed business investment and weak consumer outlays over the past two years. 

'As Mark Carney bows out as Governor of the Bank of England a rate cut should be his parting gift to his successor Andrew Bailey now that a decision on Brexit is firmly in place. 

'In some respects, we expect the MPC to put forward a finely balanced statement that will lean in the direction of accommodation for an economy that should improve later this year due to the combination of fiscal and monetary support, in addition to the release of pent up demand for outlays on software, equipment and intellectual capital. We have made the case for some time that the BoE needed to take action to support a weak economy and the January meeting is the perfect opportunity to do so. 

'We think that dovish comments from Carney over the past several weeks and the move in expectations to the point where the market has priced in a 52 per cent probability of a rate cut should be just enough to overcome those on the MPC that want to preserve the policy status quo.  In some respects, this would mirror the action taken by former ECB President Mario Draghi on his way out the door to clear the path for future action by his successor Christine Lagarde.' 

Simon Hart, Brexit lead partner from RSM UK added:

'As the UK reaches the end of the beginning of the Brexit journey and the detailed trade negotiations in goods and services with both the UK and the US get under way, stimulating the UK economy through a rate cut seems a necessary action.’