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Greene says "worst thing that can happen" is for inflation expectations to rise

BOE
  • Greene asked why inflation can fall from double figures to target quickly when it hasn't in the past
  • Says half of the inflation rise was food and energy, and a lot of that should come out in the next couple of years. It's reasonable to expect inflation to come down substantially in the next year or so.
  • Then she is asked if the BOE is correct to still increase interest rates when forecasts show such a fall by the end of the year.
  • She responds that the BOE is highlighting uncertainty and not saying inflation will get back to target by the end of the year. Does think that BOE needs to look at the drivers and if they are persistent to lean against those. The worst thing that can happen is for inflation expectations to rise, because when they become deanchored that's what happened in the 70s/80s. Says BOE is right to be concerned about the second round effects. Thinks BOE's forecasts look reasonable on the information she has publicly.
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