Finance
BoE's Greene seeks cautious approach to rate cuts, cites inflation pressure
Published by Global Banking & Finance Review®
Posted on February 12, 2025
2 min readLast updated: January 26, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on February 12, 2025
2 min readLast updated: January 26, 2026
BoE's Megan Greene calls for cautious rate cuts, citing persistent inflation. She questions BoE's optimistic inflation outlook and economic growth predictions.
By Andy Bruce
(Reuters) - Bank of England policymaker Megan Greene on Wednesday advocated a cautious approach to cutting interest rates, and said it was looking increasingly likely that policy would need keep leaning against persistent inflation pressure.
Greene, an external member of the Monetary Policy Committee who voted with the majority to cut interest rates last week by a quarter point rather than a half point, is viewed as one of its more hawkish voices.
In a speech to the Institute of Directors, Greene said she thought constrained supply capacity, rather than weak demand, explained the recent poor performance of Britain's economy.
"That is to say it's less likely inflation persistence will fade on its own accord, and more likely monetary policy will need to remain restrictive," Greene said.
"As a result, I believe it is appropriate to maintain a cautious and gradual approach to removing monetary restrictiveness."
The speech showed she was among the MPC members who wanted a "cautious" stance to cutting interest rates, rather than merely a "careful" approach that became the central bank's adopted message last week.
The BoE predicted inflation would peak at around 3.7% in the third quarter of this year. Governor Andrew Bailey said this was unlikely to cause second-round effects, where past inflation increases feeds into future price increases.
Greene expressed scepticism towards that view, pointing out that inflation looked likely to spend a fifth consecutive year above the BoE's 2% target.
"That may lower the threshold above which even a short-term rise in inflation feeds through into second-round effects," Greene said.
She also questioned the BoE's view that dire potential productivity growth last year - which determines the rate at which the economy can grow before generating inflationary pressure - will recover over the next few years.
"I think there is a considerable risk this recovery will remain elusive," Greene said.
(Reporting by Andy Bruce; Editing by Sachin Ravikumar and David Milliken)
The main topic is the Bank of England's cautious approach to interest rate cuts due to ongoing inflation pressure.
Megan Greene is an external member of the Bank of England's Monetary Policy Committee, known for her hawkish stance on rate cuts.
The Bank of England predicts inflation will peak at around 3.7% in the third quarter of this year.
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