BOE's Greene cautions UK wage growth could fuel persistent inflation

Megan Greene, a member of the Bank of England's Monetary Policy Committee, continues to flag ongoing inflation risks in the UK. Her latest comments on Friday provide little indication that she will soften her hawkish position.

• She believes the UK will experience some second-round effects from the current inflation cycle.
• Early signs point to UK wages growing around 3.5% next year, a development that concerns her.

Given her recent voting record, these remarks are not particularly surprising. Greene was one of three MPC members who backed a 25-basis-point rate hike in September. She has argued that postponing action while waiting for clearer signs of persistent inflation could force the central bank to scramble later.

Her comments therefore simply reinforce that view.

Her worry extends beyond wage growth of 3.5% in the coming year. The deeper issue is that higher prices may eventually feed into wage negotiations, prompting businesses to increase prices further. That is precisely the kind of inflation cycle the BOE aims to avoid.

Markets are already pricing in roughly an 84% probability of a 25-basis-point rate rise in November, so Greene's persistently hawkish tone is unlikely to shift expectations dramatically. Her stance has been clear since the last policy meeting.

The key question for November is whether enough of the six members who voted to hold rates in September can be persuaded that further delay poses greater risks than immediate action.