BoE’s Greene says it is right to ‘proactively tighten’ policy as gilt yields hold near 5.2%

Bank of England policymaker Megan Greene said on Wednesday it was appropriate to “proactively tighten our monetary policy stance”¹. She set out her view in a commentary on the UK labour market, written as an external member of the Monetary Policy Committee².

Her argument centred on a key judgment supporting the committee’s monetary policy strategy, which concerns the labour market². Another Bank of England policymaker has called for interest rates to be held at a higher level⁷.

The comments came a week after the Bank of England raised its base rate by 0.25 percentage points to 4 per cent, the first increase in more than three years⁶.

Greene’s comments were reported on Wednesday, alongside her published commentary^1,2. Her phrase, “proactively tighten”, points to acting ahead of evidence rather than waiting for it¹.

Why it matters to investors

Officials from major central banks are laying the groundwork for further interest-rate hikes, and a leading think tank has warned the Bank of England may have to raise borrowing costs to 5%³. Greene’s language adds a voice from inside the committee to that debate¹.

Ten-year gilt yields were little changed at 5.198% on Wednesday, according to Tradeweb data, while the US bond market was closed for Veterans Day⁴. The FTSE 100 and gilts rebounded after weakness driven by the United States⁵.

The rate outlook also feeds through to sterling. An expectation of UK rate hikes would be bullish for the currency, according to one market assessment⁵. Last week’s increase was the first in more than three years⁶, which means markets are now pricing a cycle of rises rather than a single move³.

What to watch

The key question is whether more committee members echo Greene’s call for proactive tightening^1,7. Her case rests on the labour market judgment she described², so labour data will be read for whether it supports or weakens that view.

Gilt yields near 5.198%⁴ show how much tightening markets already expect. A move toward the 5% Bank Rate level that the think tank has floated³ would mark a further shift from the 4 per cent set last week⁶.

Investors will also watch whether US market swings continue to drive UK assets, as they did before Wednesday’s rebound⁵.

A further question is whether other central banks continue to signal more rate increases, which would support the case for tighter UK policy^1,3.