BoE’s Greene Warns: Inflation Persistence May Demand Tougher Monetary Policy — What It Means for the Pound
The Bank of England’s (BoE) Monetary Policy Committee (MPC) member Megan Greene issued a stark warning that the United Kingdom’s fight against inflation is far from over. Speaking in London on Tuesday, Greene said she remains unconvinced that current monetary policy is “meaningfully restrictive” enough to bring inflation sustainably back to target — suggesting that interest rates may need to stay higher for longer.
Her remarks reinforced the central bank’s cautious stance amid ongoing economic uncertainty, highlighting that inflation risks and labour market imbalances continue to shape the BoE’s monetary outlook.
Persistent Inflation Keeps Pressure on BoE Policy
Greene underscored her concern about inflation persistence, stating that price pressures in the UK remain more entrenched than expected. “I am worried about inflation persistence in the UK,” she said. “It means monetary policy needs to be more restrictive than otherwise.”
While headline inflation has moderated in recent months, underlying indicators — particularly in services and wages — suggest that domestic inflationary momentum remains strong. The BoE’s own inflation forecasts still see price growth hovering above its 2% target well into 2026, a reflection of continued price stickiness in the broader economy.
According to Greene, household inflation expectations are now “at the very top of what we can explain,” a troubling signal for policymakers seeking to anchor expectations and avoid a wage-price spiral.
Wages and Employment Data Send Mixed Signals
The BoE policymaker noted that while recent wage data came in “a bit lower than expected,” the overall level of pay growth remains too high to be consistent with the central bank’s inflation target. “Today’s wage data is good news as it’s a bit lower than expected, but wage settlements for next year from surveys are higher than we would like to see,” Greene explained.
She also expressed uncertainty about the accuracy of current labour market data, citing “problems with the Labour Force Survey” that make it difficult to assess real employment conditions. The latest UK unemployment reading “is not great,” Greene said, but the data’s volatility has complicated the BoE’s assessment of slack in the economy.
This uncertainty — combined with structural changes in the post-pandemic workforce and ongoing demographic shifts — has made it more challenging for policymakers to gauge how much economic capacity truly exists before inflation pressures reignite.
Household Savings and Economic Caution Ahead
Greene also warned of potential “precautionary saving” among households, as uncertainties surrounding the domestic economy weigh on consumer confidence. With real wage growth barely positive and mortgage costs remaining elevated, UK consumers may become more cautious heading into 2026.
“Uncertainties around the domestic economy may have precautionary saving effects,” she said, implying that weaker consumption could counterbalance some inflationary forces — but also slow economic growth.
Such a behavioral shift could complicate the BoE’s balancing act between curbing inflation and supporting fragile growth. Recent data already show modest retail spending and faltering business investment, with the UK economy narrowly avoiding recession earlier in 2025.
FX Market Reaction — GBP Faces Mixed Outlook
In the Forex markets, Greene’s remarks reinforced expectations that the BoE will maintain a restrictive stance well into 2026, supporting the British Pound (GBP) in the short term. However, traders remain divided on the longer-term implications.
If inflation continues to ease without a rebound in consumer spending, the central bank may face growing pressure to pivot toward rate cuts. This dynamic leaves GBP/USD and EUR/GBP exposed to both inflation data surprises and evolving monetary expectations.
A more hawkish BoE tends to favor the Pound, but a prolonged slowdown could weigh on the currency as investors price in reduced economic momentum.
For Forex traders, Greene’s speech underscores the importance of monitoring both macroeconomic data and central bank sentiment. In an environment where inflation dynamics remain uncertain, volatility in the GBP and UK-linked currency pairs is likely to persist.
Learning from Market Reactions
At GME Academy, we emphasize that understanding how central bank communication drives market sentiment is essential for developing a strong Forex trading strategy. Speeches like Greene’s not only provide clues about monetary policy but also shape how traders interpret economic data and adjust positions on pairs like GBP/USD, EUR/GBP, and GBP/JPY.
By tracking policy signals, traders can anticipate potential market shifts — turning macroeconomic uncertainty into opportunity.
Stay Ahead of Central Bank Moves
Megan Greene’s comments highlight the ongoing tension within the BoE: balancing the fight against inflation with the need to sustain economic growth. For traders, the key takeaway is clear — monetary policy in the UK remains a live variable, and every statement from the MPC can move the Pound.
Now more than ever, understanding these nuances is critical for anyone involved in Forex trading.
Join our FREE Forex Workshop at GME Academy to learn how to interpret central bank statements, analyze economic data, and trade the markets with confidence.
