BoE’s Greene: Second-round effects

Megan Greene, external member of the Bank of England’s (BoE) Monetary Policy Committee (MPC), Reuters reported on Tuesday that the United Kingdom’s (UK) economic activity was weak before the Iran war but that at the same time, the war impact is inflationary.

Key takeaways:

UK activity was already pretty weak before the Iran war.

At the same time, war impact is inflationary.

I was not convinced the impact of negative supply shocks had worn off.

To my mind, the inflationary piece of this is really important.

Second-round effects.

We won’t have definitive evidence of second-round effects for a while, could take months.

We can’t just look through negative supply shocks, view needs to be more nuanced.”