Bank of England’s Greene Warns of Persistent Inflation Risks Following Iran War Energy Shock
Bank of England policymaker Megan Greene warns that energy price shocks from the Iran war could fuel persistent inflation, signaling a cautious rate path.
POLICY WIRE — London, United Kingdom — Bank of England policymaker Megan Greene has issued a stark warning that the inflationary dangers stemming from the energy price shock linked to the Iran war are significantly more severe than the central bank previously anticipated.
In a recent address at the University of Derby Business School, Greene detailed how energy shocks can permeate the economy through price- and wage-setting channels, potentially leading to more entrenched and persistent inflation dynamics.
Greene emphasized that the risks of broader inflation outweigh current concerns regarding demand. She noted that the full impact of these headline inflation effects may not be realized for several months, complicating the outlook for the British economy.
The policymaker, who recently voted with the majority of the Monetary Policy Committee to maintain the benchmark Bank Rate at 4%, reiterated her stance that interest rates should be increased to combat these pressures. Her comments reflect a hawkish outlook, suggesting that the Bank of England may need to keep borrowing costs elevated for a longer duration to mitigate second-round effects.
Reporting by Policy-Wire (PW)
