Bank of England’s Megan Greene Resists "Hike Temptation" Amid Record Surge in UK Inflation Expectations

Bank of England policymaker Megan Greene signals a cautious stance, opting to hold rates despite a record leap in UK inflation expectations to 5.4%.

By: AXL Media

Published: Mar 25, 2026, 12:43 PM EDT

Source: Reuters

A Historic Shift in Expectations The backdrop for Greene's comments is a startling surge in consumer sentiment. A recent Citi survey revealed that British inflation expectations for the coming year jumped from 3.3% in February to 5.4% in March—the largest one-month leap in over two decades. This surge is directly linked to the U.S.-Israeli conflict with Iran, which has throttled energy supplies and damaged Gulf infrastructure, leading Greene to warn that energy and food prices are unlikely to return to pre-war levels anytime soon.

Hawkish Patience Greene has a history of voting against rate cuts, having opposed them as recently as August and December 2025. However, she noted that the current labor market is weaker than it was during the 2022 energy crisis, providing the BoE with a slim margin of safety. While she is more concerned about "higher inflation" than "lower demand," she argued that a rate hike last week was not yet warranted, even as purchasing managers report a massive spike in manufacturing input prices.

TRANSFORMATIVE ANALYSIS: The "Fragile Anchor" Strategy The Bank of England is currently walking a razor's edge that differs fundamentally from the post-Ukraine shock of 2022. In 2022, the BoE was accused of being "behind the curve." In 2026, the MPC is attempting a "Fragile Anchor" strategy—acknowledging the 5.4% expectation surge without validating it with a panic hike. Greene’s refusal to be "tempted" suggests the BoE believes that the current inflation spike is a supply-side physical shock that higher interest rates cannot fix in the short term. However, by holding steady while the market prices in two hikes by July, the BoE is essentially letting the market do the tightening for them. If wage demands begin to mirror the 5.4% expectation, this "patience" will likely evaporate, potentially leading to a much steeper and more painful hiking cycle in the second half of 2026 than currently anticipated.

Market Reaction and Future Bets Financial markets have rapidly recalibrated their outlook for the pound and UK borrowing costs.

July Forecast: Investors are now betting on at least two quarter-point (25 bps) hikes by the late-July MPC meeting.

Policy Pivot: This is a dramatic reversal from just weeks ago, when the consensus was for two rate cuts in 2026.