Bank of England member Green: It would be better to start cutting interest rates later

(1) According to a report by the Financial Times (FT) on Thursday, Megan Greene, a member of the Monetary Policy Committee (MPC) of the Bank of England, said that the market currently expects the Bank of England to cut interest rates earlier than the Fed this year, and the rate cut will be greater than that of the Fed, and she believes that it would be better for the UK to start easing policy later. (2) Green wrote in an opinion piece published in the newspaper: "After US CPI inflation was unexpectedly strong in March, the market is now expecting the Bank of England to cut interest rates earlier this year than the Fed, and by a larger margin." ” (3) In an article titled "Markets Must Stop Comparing the UK and the US", Green writes that persistent inflation poses a greater threat to the UK than to the US. (4) She said: "In my opinion, the UK should be some time away from cutting interest rates. ” (5) Money markets are pricing in a 56 basis point rate cut by the Bank of England this year, with a 52% chance of a first rate cut in June, according to the London Stock Exchange Group (LSEG). This exceeded investors' expectations for a 44 basis point rate cut in the US, with the Fed's first rate cut expected in September. (6) Green said that the difference in labor supply between the two countries is also very obvious, and the inflation rate of the service sector in the United Kingdom is still much higher than that of the United States. "The overall participation rate in the UK labour market has not yet returned to pre-pandemic trends. In the U.S., participation rates are surpassing pre-pandemic trends. ” (7) The increase in inflation expectations has translated into higher wage growth, which by some measures is currently between 6-7% in the UK and 4-5.5% in the US. Green added that a further slowdown in wage growth would be needed to see services inflation return to target in a sustainable manner