BoE's Greene worried that "stance is not restrictive enough"

Megan Greene, a member of the Bank of England's Monetary Policy Committee, expressed concern about the BoE's estimate of target-consistent pay growth. She emphasized the need for more wage disinflation to meet the Consumer Price Index (CPI) target, stating that inflation expectations are currently above norms. Greene believes that the monetary policy stance is not restrictive enough.

She highlighted that wage growth of 3%, consistent with 2% inflation, is necessary to achieve the CPI target. Greene noted that people tend to notice inflation when it exceeds 3%. She also mentioned that there will likely be persistent supply shocks, further complicating the situation. Greene reiterated that she has concerns about the stance not being restrictive enough, as inflation expectations are anchored above norms.

Inflation measures the rise in the price of a representative basket of goods and services, usually expressed as a percentage change on a month-on-month or year-on-year basis. Core inflation, which economists focus on, excludes volatile elements like food and fuel. Central banks aim to keep inflation at a manageable level, typically around 2%, as measured by the Consumer Price Index (CPI).

When Core CPI exceeds 2%, central banks often raise interest rates to combat inflation, which can strengthen the country's currency. Conversely, when Core CPI falls below 2%, interest rates may be lowered, potentially weakening the currency.