Bank of England's Megan Greene on rates, energy, and inflation

Megan Greene, an external member of the Bank of England’s Monetary Policy Committee, addresses the persistent challenge of inflation and the necessity of proactive monetary policy. Successive supply shocks have fundamentally altered wage and price-setting behaviors, lowering the threshold at which households and businesses become attentive to inflation. Greene argues against relying on market premia to tighten financial conditions, advocating instead for a clear, conditional strategy to mitigate second-round effects. The discussion extends to the global economic landscape, including the potential for AI to drive long-term productivity versus short-term labor market disruptions, and the risks of fiscal dominance. Furthermore, the Bank of England’s transition to a multi-year, repo-backed quantitative tightening framework aims to keep policy in the background, ensuring that bank rates remain the primary tool for economic management.