BoE’s Greene: Warns of second-round inflation effects if we act late

The comments from Bank of England (BoE) Monetary Policy Committee (MPC) member Megan Greene released during the Asian trade on Tuesday signals that she is worried about second-round inflation effects coming into play if we [central bank] fail to act soon.

Comments

If we wait until second round effects materialise, it will be too late.

Bigger risk is not being proactive enough in tackling inflation, not raising rates too soon.

Latest IMF forecasts for UK do not surprise me.

UK monetary policy is not that restrictive.

If China revalues yuan, would put upward inflation pressure on UK.

Market reaction

No immediate reaction is seen in the British Pound (GBP) following the release of remarks from BoE's Greene. As of writing, GBP/USD is up 0.1% at around 1.3220.

Greene flags proactive BoE stance as UK inflation risks stay in focus

Greene’s 8.2/10 FXS Speechtracker score is above the historic 7.7/10 baseline, signalling a more hawkish tilt versus past speeches. The warning that “if we wait until second round effects materialise, it will be too late” and that the bigger risk is not being proactive enough in tackling inflation points to a readiness to raise rates sooner rather than later, supporting a firmer outlook for the POUND.

Greene’s comment that the latest IMF forecasts for the UK do not surprise Greene, combined with the view that UK monetary policy is “not that restrictive,” suggests room for further tightening if inflation pressures persist. This mix of comfort with the macro backdrop and concern about inflation dynamics reinforces expectations that the BANK OF ENGLAND could lean toward additional hikes, underpinning POUND resilience on a relative policy-tightening story.