Bank of England signals further rate rises as Greene backs proactive inflation response
With inflation risks still clouding the UK monetary policy outlook, Bank of England rate-setter Megan Greene says acting early is less dangerous than waiting and allowing price pressures to become embedded. Her comments come after the central bank raised borrowing costs to 4% at its November meeting and as markets price in additional increases from December into 2027.
Highlights
- Bank of England raises borrowing costs to 4% from 3.75% in November, with Greene supporting proactive tightening amid inflation uncertainty.
- Greene argues that preemptive rate hikes to limit second-round inflation effects are safer than policy inaction after five years of above-target price growth.
- Markets anticipate another rate increase in December plus two or three further quarter-point hikes in 2027, as BoE officials signal ongoing tightening.
Policy stance after November rate increase
As reported by Reuters, Greene says uncertainty over the inflation path means policymakers should focus on making the least costly mistake, arguing that tightening too much and later cutting rates would be less risky than moving too late.Greene is among the majority of Monetary Policy Committee members who vote in November to raise borrowing costs to 4% from 3.75%. She had previously been part of a minority that called for an earlier rate increase.
Speaking at a conference held by the Centre for European Reform, Greene says the bigger policy error would be failing to bring inflation under control after more than five years of above-target price growth. She adds that acting proactively offers a better chance of limiting second-round effects from inflation.
Market expectations and wider BoE signals
Earlier this week, Greene writes that it is appropriate for the Bank of England to proactively tighten policy to guard against pay growth becoming stuck at around 3.5% or higher, with companies then passing those costs through into prices.Financial markets are betting on another BoE rate increase in December, followed by two or possibly three further quarter-point moves in 2027. BoE Chief Economist Huw Pill also tells the Financial Times in an interview published on Saturday that rates will likely need to rise further in 2027, beyond a possible increase at the next meeting in December.
As highlighted earlier, New York Fed rate hikes were flagged as likely as inflation stayed above the 2% target.
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