Bank of England policymaker Catherine Greene said on Tuesday that the central bank must be prepared to raise interest rates again, arguing that “the risk of failing to act is more severe than the risk of acting” to curb persistent inflationary pressures.
Speaking at an event in London, Greene, an external member of the Monetary Policy Committee (MPC), warned that underlying price pressures in the UK economy remain “stubbornly elevated” despite recent signs of easing headline inflation. Her comments mark one of the most explicitly hawkish signals from a BoE official in recent weeks, as markets debate whether the central bank’s next move will be a cut or a hike.
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Hawkish signal amid rate-cut speculation
Greene’s remarks come at a time when financial markets have been pricing in a growing probability that the BoE will begin cutting rates later this year. The UK’s headline inflation rate fell to 3.2% in March, down from a peak of 11.1% in October 2022, but services inflation and wage growth have remained elevated, complicating the outlook.
“The risk that we do too little and inflation becomes embedded in the economy is, in my view, more costly than the risk that we do a little too much and growth slows temporarily,” Greene said. She emphasized that the MPC should not be swayed by short-term market expectations and must remain focused on returning inflation sustainably to the 2% target.
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Her stance contrasts with some other MPC members who have recently struck a more dovish tone. In March, the BoE held its benchmark rate at 5.25% for the fifth consecutive meeting, with two of the nine MPC members voting for a cut.
Implications for borrowers and the economy
For UK households and businesses, Greene’s comments suggest that borrowing costs may stay higher for longer than previously anticipated. Mortgage rates, which have eased modestly from their 2023 peaks, could remain elevated if the BoE signals a renewed tightening bias.
Economists at Capital Economics noted that Greene’s speech “pushes back against the idea that rate cuts are imminent” and reinforces the BoE’s data-dependent approach. “The MPC is clearly split, but the hawkish wing still has influence,” said Paul Dales, chief UK economist at Capital Economics.
The BoE’s next rate decision is scheduled for June 20, when the MPC will have fresh data on inflation, wages, and economic growth. Markets currently assign a roughly 40% probability of a rate cut by August, according to Refinitiv data, but Greene’s remarks could shift those odds.
Greene joined the MPC in July 2023 and has consistently voted with the majority to hold rates steady. Tuesday’s speech is her most detailed public explanation of her policy stance to date.
