Bank of England policymaker Megan Greene said it is worth waiting “a little while” to see how the Iran conflict develops before deciding whether interest rates need to rise, warning that the latest energy shock has shifted inflation risks “entirely on the upside.” Speaking in a Bloomberg podcast interview published Monday, Greene said policymakers need more time to assess how the war will “propagate through the economy” before making another move on rates.
Greene described the current environment as particularly difficult for central banks because the UK is now facing a negative supply shock that could simultaneously lift inflation and weaken growth. “We’ve now had a negative supply shock, an energy shock, and that stands to push inflation up and growth down,” she said, calling it “a terrible situation for a central banker to be in.”
At the same time, Greene suggested Britain’s weak economy and looser labor market should help contain stronger second-round inflation effects. Still, she cautioned that inflation progress had already been slowing before the Iran conflict escalated, suggesting underlying price pressures were proving more persistent even before the latest energy-driven shock hit the economy.
