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BOE policymaker Greene signals she is not ready to back rate cuts yet

Tan KW
Publish date: Thu, 22 Feb 2024, 11:57 PM
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Bank of England (BOE) policymaker Megan Greene said she needs more evidence that UK inflation is becoming less entrenched before she can back interest-rate cuts.

Speaking on Thursday, Greene said that wage growth is “heading in the right direction” but is still a “lot higher” than in the US and euro area.

Her comments at a Kroll South Africa event in Johannesburg underscore the hesitancy of BOE policymakers to begin cutting rates from a 16-year high even with the headline rate of inflation expected to fall to the 2% target in the spring, albeit temporarily.

Greene switched from backing more hikes to voting to hold rates at 5.25% this month and only one of the nine-member Monetary Policy Committee, Swati Dhingra, is currently pushing for cuts. Markets expect the BOE to begin easing policy in August, with governor Andrew Bailey this week saying that investor bets on reductions are “not unreasonable.”

“I would need to wait to see more evidence that inflation isn’t as entrenched as we had feared before I would be willing to vote [for cuts],” Greene said. 

Officials are closely monitoring services inflation and wage growth for signs that underlying price pressures are also easing. These key metrics are beginning to cool, Greene said, but inflation expectations remain above historic averages and “constrained” supply means “you can only have so much demand before it becomes inflationary”.

In a presentation covering the global economy, Greene said that most drivers in services inflation in the UK “are starting to come down so things are trending in the right direction.”

“Pay growth has remained pretty stubbornly consistent... [but] you can see it’s heading in the right direction.”

 


  - Bloomberg

 

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