MNI BRIEF: Rise In 'R*, U*' Means Higher For Longer-BOE Greene

The rise in the equilibrium, or non-inflationary jobless and interest rate meant that the policy rate may have to stay higher-for-longer, Bank of England Monetary Policy Committee member Megan Greene said Thursday.

Greene told Bloomberg news that there were structural changes to the economy post-Covid and she said her primary concern was inflation persistence. The BOE in November announced that it had revised up the equilibrium jobless rate, to 4.5% from just over 4%, and it is carrying out a supply side stock-take for its February forecast round.

Greene said she was not thinking about interest rate cuts and suggested markets had got ahead of themselves in pricing them in. "The notion that the long-run neutral rate might be a bit higher and the natural rate of unemployment might be a bit higher isn't something that everyone is grappling with," she said.

Greene voted with the minority for a hike at this month's MPC meeting.