BOE's Greene Sees Wait For Hard Evidence Of Second-Round Effects

By Paul Hannon

The Bank of England may have to raise its key interest rate if there is evidence that higher energy costs are feeding through to increased wages and prices of other goods and services, rate setter Megan Greene said Tuesday.

The BOE left its key interest rate unchanged last month, and next decides policy on April 30. Some investors expect the U.K.'s central bank to raise borrowing costs in response to the rise in energy prices that has accompanied the conflict in the Middle East.

Speaking on the sidelines of the International Monetary Fund's Spring meetings, Greene said what really matters for her decision on rates is whether there are signs of spillovers to other goods and services from higher energy prices.

"It's the second-round effects that are really difficult, and that's where the rubber hits the road for me," she said.

Higher energy prices can prompt workers to demand and secure bigger pay increases, leading businesses to raise their prices to cover their increased costs.

Greene said that workers may move more quickly to demand higher wages given their experience in 2022, when surging energy prices led to big falls in their real earnings.

"There are reasons to worry about second-round effects," she said.

However, Greene said there is more slack in the U.K.'s jobs market than there was in 2022, while demand is also weaker, suggesting businesses might not be able to pass on increased wage bills to their customers.

"We won't have definitive evidence of second-round effects for a while," she said.

Greene's comments indicate that while she is prepared to back a rise in the BOE's key interest rate, this month's meeting may be too soon for her.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

April 14, 2026 11:02 ET (15:02 GMT)