Bank of England policymaker Megan Greene argues supply shocks require proactive monetary tightening to curb inflation risks.
Bank of England external member Megan Greene cautioned against dismissing negative supply shocks, warning they could fuel persistent inflation. She highlighted that second-round effects from energy price shocks may take another year to fully materialize in economic data, creating policy challenges.
Greene noted the global economy’s resilience, supported by inventories, masks underlying vulnerabilities. She argued that three successive supply shocks over five years have caused structural damage, making traditional monetary responses inadequate. Central banks must act preemptively to avoid a toxic mix of slowing growth and rising prices.
The remarks suggest the BoE may raise interest rates in the coming months, despite recent pauses. Greene emphasized that complacency could worsen inflationary pressures, urging a proactive stance to address supply-driven disruptions.