Global investors have failed to grasp that interest rates may need to stay high for an extended period, Bank of England policymaker Megan Greene said on Thursday.
The US economist, an external member of the BoE’s rate-setting Monetary Policy Committee, believes recent structural economic changes mean elevated rates could persist.
“Markets globally haven’t really clocked on to this,” Greene told Bloomberg Television.
She is among the minority of MPC members favouring further hikes, while most opted to hold rates steady at the last two meetings.
How long UK rates stay high depends on data, Greene added. “There are reasons to think the economy may be structurally different, suggesting we might need to stay restrictive longer.”
Markets expect a 25 basis-point rate cut by mid-2024, then two more through the end of 2025. But Greene said the BoE was not discussing cuts.
She described this week’s cooler inflation and pay data as “good news” from the bank’s view. But causes for concern remained.
“I would put this in the category of good news, but I think there are still reasons to worry about persistent inflation in the UK,” Greene said.
On her next vote on December 14, she would assess forthcoming data.
