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BoE's Greene: Disinflationary process is still ongoing

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BoE's Greene: Disinflationary process is still ongoing

2025.06.09 08:20

BoE's Greene: Disinflationary process is still ongoing

2025.06.09 08:20

Bank of England (BoE) rate-setter Megan Greene said on Saturday that disinflation in the United Kingdom is set to continue despite a rise in consumer-price growth in the near term, per Bloomberg.

Key quotes

Most of the near-term hump in inflation is due to one-off factors.
We expect inflation to continue to come down to target over the medium term.
Our view is that we can look through it, but of course that's a big risk.
There is a risk people won't consume even as rates come down.
Trade fragmentation should be disinflationary for the UK.
Going forward, we could see policy divergence.

Market reaction

At the press time, the GBP/USD pair is up 0.07% on the day to trade at 1.3537.

BoE FAQs

What does the Bank of England do and how does it impact the Pound?

The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve 'price stability', or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).

How does the Bank of England's monetary policy influence Sterling?

When inflation is above the Bank of England's target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects - a negative for the Pound Sterling.

What is Quantitative Easing (QE) and how does it affect the Pound?

In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets - usually government or AAA-rated corporate bonds - from banks and other financial institutions. QE usually results in a weaker Pound Sterling.

What is Quantitative tightening (QT) and how does it affect the Pound Sterling?

Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.

Created

: 2025.06.09

Last updated

: 2025.06.09

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