BoE's Greene backs more rate hikes in November

Greene has already voted for quarter-point increases in June, July and September, taking her preferred level to 4%. Markets are now pricing a majority on the MPC to support a move to 4% next month, putting her view broadly in line with expectations. But her warning pushes back against the more cautious argument from Governor Andrew Bailey, who has suggested that the sharp rise in market borrowing costs after the start of the U.S.-Iran war has bought the BoE time to assess whether higher energy prices will itself feed through into inflation.

That distinction matters for the economy because higher gilt yields and mortgage rates tighten financial conditions unevenly and indirectly. They raise borrowing costs for households and businesses, but they do so through volatile market channels rather than the policy rate the BoE directly controls. Reliance on those channels alone risks leaving inflation too dependent on market sentiment and geopolitics, both of which can reverse quickly. Greene’s message is that the central bank should not outsource inflation control to the bond market.

For investors, the immediate implication is that the bar for a November rate hike remains low and that UK rates may have further to rise even if bond yields stay elevated. That is supportive for sterling in principle and for short-dated gilt yields in particular, while longer-dated bonds may remain pressured if traders conclude the BoE will continue to lean against inflation more aggressively than Bailey’s comments implied. The market picture already reflects that tension: UK 10-year yields have climbed to about 5.2%, while the pound has been relatively steady around $1.32, suggesting investors are still weighing growth risks against the chance of further tightening.

The broader backdrop is one of stubborn inflation and restrictive financial conditions. US consumer prices are still rising at an annual pace of roughly 3.3%, the American unemployment rate remains close to 4.2%, and global bond markets have sold off enough to push the US 10-year Treasury yield to around 5.2%, levels that would once have done much of the central bank’s job for it. But central bankers are increasingly wary of letting markets substitute for policy, especially when inflation risks are driven by energy shocks and supply-side disruptions.

The bear case for Greene’s stance is that another hike could deepen the slowdown just as households are absorbing higher mortgage costs and firms face tighter credit. The bull case is that failing to act would risk allowing inflation expectations to become less anchored, forcing the BoE to do more later. For now, Greene’s comments suggest the November meeting is likely to be another test of whether the MPC wants to validate the tightening already delivered by markets, or reinforce it with an explicit policy move.