BOE monetary policy committee member, Megan Greene, is continuing to sound the alarm over persistent inflation risks in the UK, with her latest remarks today offering little reason to think that she will be backing away from her more hawkish stance.
- I do think UK will see some second-round effects from current inflation cycle
- Early indications are that UK wages will grow around 3.5% next year, and that worries me
Her remarks aren’t exactly all too surprising, considering her recent policy leaning. As a reminder, Greene was among the three policymakers at the central bank who voted for a 25 bps rate hike in September. She argued that waiting for clearer evidence of persistent inflation could leave the central bank having to play catch-up down the road.
As such, her comments above only reinforce that thinking.
Her concern isn’t simply about wages growing at 3.5% in the year ahead, it is that higher prices will eventually feed into wage negotiations and in turn encourage businesses to raise prices further. And that’s the sort of inflation cycle the BOE would rather avoid.
In any case, markets are already pricing in roughly an 84% probability of a 25 bps rate hike in November, so Greene’s continued hawkish message isn’t necessarily going to shift expectations dramatically. She has already made her position quite clear since the last meeting.
What matters for November is whether enough of the six members who voted to hold rates in September can be convinced that waiting any longer carries greater risks than acting now.
This article was written by Justin Low at investinglive.com.