It’s worth waiting to see how the US-Iran war develops before deciding whether to hike interest rates Inflation risks are skewed entirely to the upside Sluggish economy and loose labour market should limit second-round effects from energy shock BoE’s Greene has been one of the…
st hawkish members in the MPC for a while as she kept warning on upside inflation risks even before the US-Iran war started. More recently, she’s been curiously neutral despite the energy shock adding to the upside inflation risk argument
In fact, she preferred keeping rates steady because in her view, the sluggish economy and loose labour market should limit second-round effects. She’s mindful that a rate hike now could prove to be a policy error if the war leads to a severe global demand shock. She suggests that waiting until the impacts from the war are clearer would be better at this point.
She remains concerned though that while headline inflation has dropped from its historic peaks, the “last mile” to the 2% target for core inflation remains the hardest. She has frequently pointed to services inflation and elevated wage growth as signs that domestic price pressures are not yet defeated. The next policy meeting is in June and we will get more UK data before that.