By Ed Frankl
Increased divergence between the Federal Reserve and the Bank of England would likely push up on inflation in the U.K., BOE policymaker Megan Greene said.
"The markets are currently pricing in a large risk of a looser Fed policy stance in 2026. If this were to materialize, then it would--all else equal--push up on U.K. inflation," she said in a speech in London.
That would give greater cause for concern about U.K. inflation persistence, over that of weaker demand, warranting slower withdrawal of monetary-policy restriction, she said.
President Trump has repeatedly demanded the Fed lower interest rates, criticizing its Chair Jerome Powell for being "too late." Trump is expected to name a new chair later this month.
The BOE cut its benchmark rate in December to 3.75%, its fourth reduction in borrowing costs in 2025. Greene was one of four of the nine-member rate-setting committee that preferred to keep rates on hold.
However, Greene said that she is "less concerned" that the underlying disinflation process has slowed than a few months ago, though this is still a greater weight than that of weaker demand in the economy.
Inflation has been below Bank of England expectations in recent months. The central bank said in December it expects inflation to be closer to its 2% target in April.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
01-23-26 0527ET
