LONDON, Nov 14 (Reuters) – 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 was among the majority of Monetary Policy Committee members who at the BoE’s November meeting voted to raise borrowing costs to 4% from 3.75%, and had previously been part of a minority calling for an earlier rate hike.
“When you have no idea where inflation is going, when you’re facing uncertainty, I think you need to adopt an attitude of how can I screw this up the least?” she told a conference held by the Centre for European Reform.
Greene restated her view that, given the uncertainty about the inflation outlook, it was less risky for the BoE to raise rates too much and then have to cut them if second-round effects did not materialise, than to wait too long to tighten policy and thereby risk letting inflation get out of hand.
“I think the risk of not getting on top of inflation coming out of a period when we’ve had inflation over target for the best part of about five-and-a-half years, that’s the bigger risk, that would be the bigger policy mistake,” she said.
“So I think there’s a benefit in acting proactively in terms of kind of screwing it up the least.”
Greene wrote earlier this week that it was appropriate for the BoE to “proactively tighten” its monetary policy stance to guard against the risk of pay growth getting stuck at around 3.5% or higher and firms passing the costs on through higher inflation.
Financial markets are betting on the BoE hiking interest rates again in December and following that up with 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 it was likely there would be a need to raise rates further in 2027, over and above an increase at the next meeting in December.
(Reporting by Suban Abdulla and Michael HoldenEditing by Gareth Jones)
