BoE's Greene says acting now on inflation would 'screw' things up the least
Bank of England policymaker Megan Greene said on Saturday it was better to act proactively now on inflation than risk significant second-round effects, after the Bank raised rates to 4% in November.
Act now, 'screw it up the least'
Bank of England policymaker Megan Greene said on Saturday it was better to act proactively now to get on top of inflation than to take a more cautious approach and risk significant second-round effects, Reuters reported.
'When you have no idea where inflation is going, when you're facing uncertainty, I think you need to adopt an attitude of how can I screw this up the least?' she told a conference held by the Centre for European Reform.
Greene restated her view that, given the uncertainty about the inflation outlook, it was less risky for the Bank to raise rates too much and then have to cut them if second-round effects did not materialise, than to wait too long to tighten policy and thereby risk letting inflation get out of hand.
A 4% Bank Rate — and markets expect more
Greene was among the majority of Monetary Policy Committee members who at the Bank's November meeting voted to raise borrowing costs to 4% from 3.75%. She had previously been part of a minority calling for an earlier rate hike.
Financial markets are betting on the Bank hiking interest rates again in December and following that up with two or possibly three more quarter-point moves in 2027.
Bank of England Chief Economist Huw Pill told the Financial Times in an interview published on Saturday it was likely there would be a need to raise rates further in 2027, over and above an increase at the next meeting in December.
Why waiting is the bigger mistake
'I think the risk of not getting on top of inflation coming out of a period when we've had inflation over target for the best part of about five-and-a-half years, that's the bigger risk, that would be the bigger policy mistake,' she said. 'So I think there's a benefit in acting proactively in terms of kind of screwing it up the least.'
Greene wrote earlier this week that it was appropriate for the Bank to 'proactively tighten' its monetary policy stance to guard against the risk of pay growth getting stuck at around 3.5% or higher and firms passing the costs on through higher inflation.
Taken together, the two officials' remarks point to a Bank that expects to keep tightening into 2027 rather than pause after November's move.
- 4%Bank Rate after the Bank of England's November hike
- 3.75%Bank Rate before the November hike
- Around 3.5%Pay growth level Greene warned could get stuck
- Five-and-a-half yearsHow long inflation has run over target
- Two or threePossible further quarter-point moves in 2027
- DecemberWhen markets expect the next Bank of England hike
