London: Bank of England (BoE) policymaker Megan Greene has signaled that interest rates in the UK are likely to decline further, although she cautioned that inflationary pressures may not ease as quickly as expected. Speaking at the Society of Professional Economists’ annual conference, Greene highlighted that while monetary policy remains restrictive, it is less stringent than before a factor that could influence inflation trends.
British consumer price inflation stood at 3.8% in August, significantly higher than the BoE’s 2% target, and the central bank anticipates it will peak at 4% in September. Greene expressed concern over the persistence of inflation, noting that the disinflationary process is still present but could slow.
Last month, Greene, along with most members of the BoE’s Monetary Policy Committee, voted to maintain the Bank Rate at 4%. She opposed a quarter-point cut in August, which was narrowly approved by a 5-4 vote. Investors, meanwhile, are only factoring in the next reduction in borrowing costs around April next year, reflecting caution over future rate adjustments.
Greene also voiced apprehension regarding the pace of productivity growth in the UK. While the BoE’s central forecast expects productivity to return to historical trends in the coming years, Greene warned that the risk remains predominantly on the downside. This outlook could further impact economic projections and add pressure on the government’s fiscal planning, including potential adjustments to official productivity and growth forecasts ahead of Finance Minister Rachel Reeves’ annual budget.
BoE Governor Andrew Bailey has reiterated that further rate cuts are expected, but the timing and scale will be guided by ongoing inflationary dynamics. Greene’s remarks underline the delicate balance the central bank faces in supporting economic growth while managing inflationary pressures in an evolving UK economy.