Bank of England MPC member Megan Greene, speaking Thursday at a STANLIB Asset Management conference in Cape Town, sharpened the debate over whether higher market borrowing costs can continue doing part of the BoE’s tightening work. Greene warned it would be “quite dangerous” to assume markets will keep doing the job for policymakers, adding that “at some point, you need to put your money where your mouth is.” Her comments contrast with BoE Governor Andrew Bailey’s argument that the rise in gilt yields and mortgage rates since the US-Iran war has given the central bank time to assess whether another Bank Rate increase is necessary.
Greene’s concern is reinforced by the wage outlook. She said early indications suggest UK pay settlements could rise by around 3.5% next year, leaving “not a whole lot of wage disinflation happening there.” For Greene, that pace remains uncomfortable for returning inflation sustainably to the 2% target. Her position is consistent with her recent voting record: she backed a 25bp increase to 4% in June, July and September, keeping her firmly on the hawkish side of the MPC debate.
The policy split is therefore increasingly about substitution rather than direction. Bailey sees tighter market financial conditions as buying the BoE time, while Greene argues those conditions cannot indefinitely substitute for an actual change in Bank Rate if domestic inflation pressure, particularly wages, remains persistent. The key implication is that elevated gilt yields and mortgage rates may delay the timing of a BoE hike, but in Greene’s view they do not remove the need for one if wage disinflation fails to materialize.
Key Takeaways
- BoE MPC member Megan Greene warned against relying indefinitely on higher gilt yields and mortgage rates to do the central bank’s tightening work.
- Greene said it would be “quite dangerous” to assume markets will keep doing the job, adding that “at some point, you need to put your money where your mouth is.”
- Her stance contrasts with BoE Governor Andrew Bailey’s view that tighter market financial conditions have bought policymakers more time to assess whether another Bank Rate increase is needed.
- Greene also flagged early indications of around 3.5% pay settlements next year, saying there is “not a whole lot of wage disinflation happening there.”
- Sticky wage growth keeps the domestic inflation problem alive and supports Greene’s case for further policy tightening.
- Greene has already voted in June, July and September for a 25bp increase to 4%, so the latest remarks reinforce an established hawkish position rather than signal a new shift.
- The emerging BoE debate is increasingly about substitution: whether market tightening can merely delay a rate hike, or whether it can genuinely replace one.
- Greene’s answer is clear: market tightening may buy time, but it cannot permanently substitute for BoE action if wage disinflation remains insufficient.
