BoE’s Greene warns stalled wage disinflation raises inflation risks

Megan Greene, a member of the Monetary Policy Committee (MPC) of the Bank of England (BoE), said on Tuesday that “wage disinflation has stalled,” a hint that salaries could begin to push prices higher.

Greene added that she continues to believe that “We [the BoE] should proactively lean against the risk of second-round inflation effects,” noting that the risks are “greater than we thought.”

She underscored that wage disinflation appears to have stalled at levels above the BoE’s goal. Her comments come a day before the release of inflation figures in the UK.

Key highlights:

Wage disinflation has stalled

Continue to believe we should proactively lean against the risk of second-round inflation effects

The risk of second-round effects is greater than we thought.

Forward-looking data point to pay growth closer to 3.5%

Wage disinflation appears to have stalled at levels above those consistent with inflation at 2%

Economy has shown surprising resilience

Labor market slack might have hit its peak