BoE’s Greene says acting proactively now on inflation would ’screw’ things up the least

Bank of England policymaker Megan Greene maintained that a proactive approach to tackling inflation is preferable to a more cautious stance. At the Bank's November meeting, Greene and her fellow Monetary Policy Committee members voted to increase borrowing costs to 4% from 3.75%. Greene, who had previously been a minority voice advocating for an earlier rate hike, emphasized the need to minimize potential second-round effects in an uncertain environment.

She told a Centre for European Reform conference that it was less risky to raise rates too much and subsequently have to cut them if inflation did not materialize, as opposed to waiting too long to tighten policy and potentially allowing inflation to spiral out of control. Greene argued that the greatest policy mistake would be failing to get a handle on inflation after it has remained above target for nearly five-and-a-half years.

She further stated that taking proactive measures to tighten monetary policy was beneficial in minimizing the risk of persistent pay growth near 3.5% or higher and firms passing those costs onto consumers, thereby causing inflation to rise. Financial markets expect the Bank of England to raise interest rates again in December and potentially make two or three more quarter-point hikes in 2027.

BoE Chief Economist Huw Pill indicated in a recent interview that further rate hikes beyond the December increase may be necessary in 2027.