{"id":72914,"date":"2026-10-12T23:38:12","date_gmt":"2026-10-13T03:38:12","guid":{"rendered":"https:\/\/www2.stockmarketwatch.com\/stock-market-news\/boes-greene-warns-of-inflation-second-round-effects-signals-hawkish-stance\/72914\/"},"modified":"2026-10-12T23:38:12","modified_gmt":"2026-10-13T03:38:12","slug":"boes-greene-warns-of-inflation-second-round-effects-signals-hawkish-stance","status":"publish","type":"post","link":"https:\/\/www2.stockmarketwatch.com\/stock-market-news\/boes-greene-warns-of-inflation-second-round-effects-signals-hawkish-stance\/72914\/","title":{"rendered":"BoE\u2019s Greene Warns of Inflation \u2018Second-Round Effects,\u2019 Signals Hawkish Stance"},"content":{"rendered":"<h2>Key Takeaways<\/h2>\n<ul>\n<li><strong>Bank of England (BoE)<\/strong> policymaker <strong>Megan Greene<\/strong> warned that the central bank must act proactively to prevent <strong>second-round inflation effects<\/strong>, stating that waiting for hard data in <strong>early 2027<\/strong> would be &quot;too late.&quot;<\/li>\n<li>Greene characterized current UK monetary policy as <strong>&quot;relatively accommodative&quot;<\/strong> rather than restrictive, suggesting a readiness to support further interest rate hikes to reach the <strong>2% inflation target<\/strong>.<\/li>\n<li>The <strong>International Monetary Fund (IMF)<\/strong> revised its UK growth forecast to <strong>1.3% for 2026<\/strong>, but warned that the UK will face the <strong>second-highest inflation<\/strong> in the G7 over the next two years, averaging <strong>3.3%<\/strong>.<\/li>\n<li>Concerns regarding a <strong>3.5% wage growth<\/strong> outlook for next year were highlighted as a primary driver for persistent price pressures and a potential barrier to disinflation.<\/li>\n<\/ul>\n<h2>Proactive Stance Against Inflation Risks<\/h2>\n<p>Bank of England Monetary Policy Committee (MPC) member <strong>Megan Greene<\/strong> delivered a hawkish assessment of the UK economy on Tuesday, emphasizing that policymakers cannot afford to be reactive. Greene noted that the biggest risk currently facing the BoE is <strong>not being restrictive enough<\/strong> in its policy stance. She argued that the central bank must &quot;lean against&quot; potential second-round effects\u2014where initial price shocks lead to sustained wage and price increases\u2014before they become entrenched in the economy.<\/p>\n<p>Greene specifically pointed out that hard evidence of these second-round effects may not be visible in economic data until <strong>early next year<\/strong> or even <strong>2027<\/strong>. Consequently, she believes the BoE must take preemptive action. This stance aligns with her recent voting record, having supported a quarter-point rate hike to <strong>4%<\/strong> in June, July, and September.<\/p>\n<h2>IMF Outlook and Economic Headwinds<\/h2>\n<p>The latest <strong>International Monetary Fund (IMF)<\/strong> World Economic Outlook, released on October 13, provided a sobering backdrop to Greene&#39;s comments. While the IMF upgraded the UK&#39;s <strong>2026 GDP growth<\/strong> forecast to <strong>1.3%<\/strong> (up from previous estimates of 1.0%), it warned that high energy prices and long-term interest rates will continue to weigh on consumption.<\/p>\n<p>Furthermore, the IMF predicts that UK inflation will average <strong>3.3% in 2026<\/strong> and <strong>2.8% in 2027<\/strong>. This would result in the UK suffering the second-highest inflation rate among G7 nations, trailing only the United States this year and Germany in 2027. Greene stated that these forecasts &quot;come as no surprise&quot; given the successive supply shocks the global economy has endured.<\/p>\n<h2>Wage Growth and Market Reaction<\/h2>\n<p>A significant point of concern for Greene is the outlook for <strong>UK wage settlements<\/strong>, which are currently projected to grow by approximately <strong>3.5%<\/strong> next year. She described this level of pay growth as a &quot;material risk&quot; that could slow the progress of returning inflation to the <strong>2% target<\/strong>. Greene cautioned that there is &quot;not a whole lot of wage disinflation happening,&quot; which justifies maintaining a restrictive policy for a longer duration.<\/p>\n<p>Market reaction to Greene&#39;s remarks was relatively muted but firm. The British Pound (<strong>GBP\/USD<\/strong>) traded slightly higher at approximately <strong>1.3220<\/strong> following the comments. Financial markets currently price in an <strong>86% probability<\/strong> of a BoE rate hike at the next meeting in early November, as investors digest the signal that the central bank remains focused on aggressive inflation containment.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key Takeaways Bank of England (BoE) policymaker Megan Greene warned that the central bank must act proactively to prevent second-round 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