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UK wage growth and services inflation too high for rate cut, BoE's Greene says

Published 18/04/2024, 16:18
© Reuters. FILE PHOTO: A tourist shelters from the rain under an Union Jack umbrella near the Bank of England in the City of London financial district in London, Britain, February 13, 2024. REUTERS/Isabel Infantes/File Photo

(Reuters) -Britain's latest wage growth and services price inflation data is too high for the Bank of England to consider cutting interest rates, BoE policymaker Megan Greene said on Thursday.

"The numbers that we're seeing in terms of wage growth and services inflation just aren't consistent with a sustainable 2% (consumer price) inflation target," she said during a discussion hosted by the Atlantic Council think tank in Washington.

Last week Greene wrote that interest rate cuts in Britain remained "a way off" because of persistent inflation pressure, and that she expected the BoE to cut interest rates by less than the U.S. Federal Reserve would this year.

Asked again how soon a rate cut might come, Greene said: "I don't think it's imminent."

"I just want to wait and see more progress in the direction that we're looking for before I feel confident in cutting rates," she added.

Financial markets currently price in a first quarter-point BoE rate cut for August or September, and see a roughly 50% chance of a second quarter-point move before the end of 2024.

Official data this week showed British consumer price inflation dropped to 3.2% in March from 3.4% in February, a slightly smaller decline than the median expected in a Reuters poll of economists.

Annual services price inflation edged down to 6.0% in March from 6.1%.

© Reuters. FILE PHOTO: A tourist shelters from the rain under an Union Jack umbrella near the Bank of England in the City of London financial district in London, Britain, February 13, 2024. REUTERS/Isabel Infantes/File Photo

Greene reiterated the BoE forecast that inflation would return to its 2% target in the second quarter of this year but then rise again towards the end of the year.

Separate figures on Tuesday showed wage growth excluding bonuses in the three months to the end of February fell less than expected to 6.0% from 6.1% in the three months to January.

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