London, 23 January 2026 – A senior policymaker at the Bank of England has sounded a note of caution on inflation as the UK grapples with uneven price pressures and evolving economic dynamics, highlighting the ongoing complexity facing monetary authorities in an uncertain global environment. Megan Greene, an external member of the Bank’s Monetary Policy Committee (MPC), said she remains “still worried” about underlying inflationary pressures, particularly wage growth and inflation expectations, which could justify a slower pace of interest rate cuts in the United Kingdom than in other major economies.
Speaking on Friday in remarks to the Resolution Foundation, a London-based think tank, Greene emphasised that while headline inflation in Britain has edged higher recently, underlying forces driving prices remain a concern for policymakers. She pointed to persistent wage growth and forward-looking price expectations among households and businesses as key variables that require careful monitoring before easing monetary policy further.
“Inflation expectations and the pace of wage growth matter just as much as headline figures,” Greene said, underscoring her stance that the MPC should be cautious in trimming borrowing costs until there is clearer evidence that inflationary momentum is truly subsiding. She noted that while the UK labour market has shown signs of weakening ahead of last year’s budget, the slowdown appears to be gradual rather than sharp, a dynamic that complicates the policy outlook.
A significant backdrop to Greene’s comments is the ongoing divergence in monetary policy paths between the Bank of England and other major central banks, especially the U.S. Federal Reserve. She said that spillovers from foreign monetary policy, particularly from the U.S. and Eurozone, could influence UK inflation and growth, potentially strengthening the case for a more cautious and differentiated approach by the BoE relative to its peers.
Governor Andrew Bailey and other MPC members have said they expect inflation to trend back toward the Bank’s 2 per cent target by mid-2026, but the process appears uneven. Recent data showed a modest uptick in UK consumer prices, partly driven by seasonal and volatile components, even as core inflation indicators remain under scrutiny.
Market analysts are watching closely. Wall Street firms including Morgan Stanley recently adjusted expectations around the timing of potential Bank of England rate cuts, now forecasting a first reduction in March 2026 rather than earlier in February, as inflation surprised to the upside late last year.
What This Means for UK Markets and Policy
Greene’s remarks reflect a broader debate within the MPC about the timing and pace of monetary easing. While some committee members lean toward measured rate reductions as inflation moderates, others remain wary of prematurely loosening policy if underlying pressures, especially wage growth, do not weaken sufficiently.
This internal MPC dynamic matters for markets and borrowers alike. A slower pace of rate cuts could keep borrowing costs elevated for longer, influencing everything from mortgage rates to corporate financing decisions. It also highlights the tightrope central banks walk this year: balancing support for economic growth with vigilance against inflation resurgence, especially amid global uncertainties and divergent monetary policy trends.
The next BoE monetary policy decision is due on 5 February 2026, with markets currently pricing in a steady rate at 3.75 per cent, though expectations for cuts later in 2026 remain contingent on incoming economic data.
