BoE policymaker Megan Greene sounded a hawkish note today, warning that interest rates may need to stay elevated for an extended period to ensure inflation is fully subdued. She said monetary policy is “less restrictive than it had been,” a worrying sign given that price growth has shown renewed momentum over the past year.
While Greene believes the disinflation process “remains intact,” she expressed concern that it is losing pace, adding that inflation’s earlier spike above 11% has likely reshaped consumer and business behavior.
Ahead of Tuesday’s key U.K. wage and jobs data, Greene said the labor market appears to be stabilizing after a mild slowdown, having avoided the sharp deterioration some had feared earlier in the year. That resilience, combined with lingering inflation pressures, supports the case for patience before cutting rates again.
To ensure inflation is fully defeated, Greene argued that the Bank Rate should be “more restrictive than the market curve”, but without undermining the BoE’s credibility by alternating between hikes and cuts. Instead, she said the preferable path would be to keep rates “higher for longer”, and “skipping some rounds in terms of rate cuts.”
