Greene’s remarks reinforce the hawkish wing of the MPC and support market expectations of a November hike, which recent reports put at around 84%. Her warning about second-round effects ties directly to the energy shock from the Iran war: if higher oil and diesel costs feed into wages and pricing, the case for tightening strengthens further, keeping short-dated gilt yields and sterling sensitive to energy prices. The comments also add pressure on the gilt market at a time when global bond yields are already elevated. Upcoming UK wage and inflation data will be key for whether her view gains wider support on the committee.
—
Greene’s message is simple: by the time inflation shows up in wages and prices, it will be too late, so the Bank should move before it gets there.
Summary:
- Bank of England MPC member Megan Greene said UK monetary policy is not that restrictive
- She warned that waiting for second-round inflation effects to materialise before acting would leave the Bank too late
- In her view, the bigger risk is not being proactive enough on inflation, rather than raising rates too soon
- Greene said the latest IMF forecasts for the UK did not surprise her
- She has voted for a rate hike at recent meetings, including in September, when she was one of three members outvoted by a majority favouring a hold
Bank of England policymaker Megan Greene said UK monetary policy is not that restrictive, warning that waiting for second-round inflation effects to become visible before acting would leave the central bank responding too late.
Greene, an external member of the Monetary Policy Committee, said she sees the bigger risk as failing to be proactive enough in tackling inflation, rather than raising interest rates too soon. Second-round effects occur when an initial price shock, such as a rise in energy costs, feeds into wages and broader price-setting, making inflation more persistent.
Her comments reinforce her position as one of the more hawkish members of the committee. Greene voted for a quarter-point rate increase at the Bank’s July and September meetings, when she was among three members outvoted by a majority that preferred to keep rates on hold.
Greene has made similar arguments in recent days. Last week, she said she expected the UK to see some second-round effects from the current inflation cycle and voiced concern that wage growth of around 3.5% next year would be worrying, raising the risk that higher prices feed into pay deals and prompt firms to raise prices further.
She said the International Monetary Fund’s latest forecasts for the UK did not surprise her. The IMF raised its 2026 UK growth forecast to 1.3% this week, citing stronger AI-related investment, while warning that the global outlook faces significant risks from the war in the Middle East and elevated energy prices.
The UK, like other major economies, is grappling with inflation pressure from higher oil and diesel prices following the conflict involving Iran. Policymakers who favour acting early argue that letting those costs become embedded in wages and inflation expectations would ultimately require more painful tightening later.
Markets have increasingly priced a rate hike at the Bank’s November meeting, and Greene’s remarks suggest she will continue to make the case for tighter policy. The next round of UK wage and inflation data will help determine whether that view gains broader support on the committee.
This article was written by Eamonn Sheridan at investinglive.com.