BOE's Greene Warns Inflation Second-Round Effects Risk Exceeding Expectations
nashnova research
BOE rate-setter Megan Greene warned Tuesday that the energy shock from the Iran war is fueling second-round inflation effects beyond the Bank's expectations, reiterating the case for a rate hike; markets now price in a 25 bp increase to 4% next month, with the MPC's internal divide the next key variable.
What are "second-round effects," and why is Greene alarmed?
Second-round effects — energy prices rise → wages and other costs follow → inflation feeds on itself — carry greater risk than the BOE previously assumed.
Greene's stance is explicit: better to hike early and reverse later than to wait and lose control.
This means → she is betting that over-tightening is fixable, under-tightening is not — a minority view inside the MPC.
What is the wage data really saying?
Greene argued that UK wage growth is running above what official data show.
With inflation likely still around 4% in early 2027, pay settlements could overshoot expectations.
In plain terms = workers see prices staying high, so they demand bigger raises — which pushes up business costs and prices again. That is the inflation loop in action.
A resilient economy — so why does that strengthen the case for hikes?
The UK economy has held up well despite sharply higher energy prices.
Greene reads this as evidence that current rates are not meaningfully restrictive — in other words, rates are still too low.
This means → the more the economy absorbs, the more room the BOE has to tighten; for markets, that is not reassuring.
Where does the MPC stand, and what comes next?
Greene belongs to the hawkish minority on the MPC; Governor Andrew Bailey currently backs holding rates steady.
Bailey has acknowledged, however, that the longer the conflict lasts, the harder it becomes to stand pat — even though he views inflation pressures as "fairly contained" for now.
Markets expect a 25 bp hike to 4% next month. Greene's public push reinforces that expectation, and the direction of the MPC's internal split is the next thing to watch.
市场有风险，内容仅供研究参考，不构成投资建议。