Bank of England policymaker Megan Greene says acting proactively now is better than a cautious approach that risks significant second-round effects. Markets are betting on another hike in December, and the BoE's chief economist also sees a likely need for more tightening in 2027.
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.
Greene backed November's hike
Greene was among the majority of Monetary Policy Committee members who voted to raise borrowing costs to 4% from 3.75% at the BoE's November meeting. She had previously been part of a minority calling for an earlier rate hike.
Speaking at a conference held by the Centre for European Reform, she restated her view that uncertainty about the inflation outlook makes raising rates too much the less risky error. If second-round effects did not materialise, the BoE would have to cut rates, whereas waiting too long to tighten could let inflation get out of hand.
Greene said the risk of failing to get on top of inflation after the best part of about five-and-a-half years above target was the larger one. According to Reuters, she said: "that’s the bigger risk, that would be the bigger policy mistake"
Pay growth worries and market bets
Earlier this week, Greene wrote that it was appropriate for the BoE to tighten its stance proactively to guard against pay growth getting stuck at around 3.5% or higher, with firms passing the costs on through higher inflation.
Financial markets are now betting on another BoE hike in December, followed by two or possibly three more quarter-point moves in 2027.
BoE Chief Economist Huw Pill told the Financial Times in an interview published on Saturday that further rises in 2027 were likely to be needed, on top of an increase at the December meeting.
Source: Reuters via Investing.com
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