BoE's Greene Calls Waiting on Inflation the 'Bigger Policy Mistake'

Bank of England policymaker Megan Greene said on Saturday it is less risky to raise rates too far and cut later than to wait, with Bank Rate at 4% after this month's hike from 3.75%.

"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," Greene told a Centre for European Reform conference in London, Reuters reported.

Her worry is the second round. Greene wrote earlier this week that the bank should "proactively tighten" to guard against pay growth getting stuck around 3.5% or higher and firms passing those costs on, according to Reuters and PiQ Markets.

What a second-round effect is

A first-round effect is a direct price jump, such as higher energy bills. The second round comes when workers win bigger raises to keep up and companies lift prices to cover the wages, which can keep inflation high after the original shock fades. The Bank of England's own rate page says energy prices have stayed high because of conflict in the Middle East, puts inflation at 3.5% against a 2% target, and says it expects inflation to reach about 5% by mid-2027.

Greene voted with the majority for the November hike and earlier sat in a minority that wanted to move sooner, Reuters reported.

More hikes priced in

Markets are betting on another Bank of England increase in December and two or possibly three more quarter-point moves in 2027, per Reuters. Chief Economist Huw Pill told the Financial Times in an interview published Saturday that further increases are likely to be needed in 2027 beyond December, Reuters said.

For crypto, the link runs through yields. When central banks lift rates, cash and government bonds pay more, which raises the bar for assets that pay no interest, bitcoin included. The Fed decides on Dec. 8-9 and the Bank of England on Dec. 17.