Greene Sees Wage Growth Holding at 3.5%, Keeps UK Rate Hike in Play

Key Facts

Megan Greene, a member of the Bank of England’s Monetary Policy Committee, said wage growth is likely to hold near 3.5% over the coming year, citing the forward-looking wage indicators monitored by the bank. In a speech to the Economics Society at the London School of Economics, she said the indicators “all suggest that wage growth is likely to settle at a level closer to 3.5% than to 3% over the coming year.” Greene sees a level closer to 3% as more consistent with the inflation target, making continued wage growth near 3.5% a concern for monetary policy. That assessment puts wage pressures at the heart of the debate over whether monetary policy needs to remain restrictive. It follows the bank’s rate increase at its latest meeting, while the timing of any subsequent move remains in focus.

Greene’s warning drew on the record of pay settlements, which exceeded Bank of England agents’ survey forecasts in each of the previous two years. Actual settlements reached 4% in 2025, compared with a survey forecast of 3.7%. For 2026, the current estimate for settlements is 3.6%, against 3.4% in the survey forecast. Greene said the gap showed that previous estimates had not fully captured the strength of wage growth. The bank’s agents also reported that 2027 settlements are expected to be at similar levels to those in 2026 or slightly lower, which Greene viewed as a sign that the decline in wage inflation could stall.

In an interview published on 10 November, Deputy Governor Clare Lombardelli said the December meeting remains open to another rate increase, with the decision tied to developments in the conflict, energy prices and broader economic data. She said: “Every meeting is live; a rate increase in December is certainly a possibility.” She noted that market pricing for the chance of a hike was close to 50/50 at the time of the interview. That possibility follows the Monetary Policy Committee’s 8-to-1 vote at its 4 November meeting to raise rates by 0.25 percentage points to 4%, while the dissenting member preferred an increase of 0.5 percentage points to 4.25%. The previous decision shows the committee was divided over the scale of tightening, while the next decision remains subject to its assessment of changing conditions.

The Monetary Policy Committee faces a mix of existing inflation and concerns about the pass-through of pressures to prices and wages. The bank said consumer price inflation was 3.5% in September and that it expects it to rise to about 5% by mid-2027. At the same time, it said evidence that higher energy prices are feeding through to other prices and wages remains limited. But it judged that accumulated inflationary pressures in the pipeline were sufficient to warrant a rate increase. This balance explains why wages and energy are being monitored together: the bank faces the prospect of inflation remaining high even as broad second-round effects on prices and wages have yet to emerge.

Greene warned that waiting for upcoming wage data before taking a position could be too late, because monetary policy takes time to have an effect. She said the bank’s agents’ wage survey will be published in February 2027, while most 2027 pay settlements are expected to be agreed between January and April. She added that the bank’s agents currently expect those settlements to be similar to 2026 levels or slightly lower, but Greene said the decline in wage inflation may be close to stalling. That leaves policymakers weighing whether to wait for clearer data or act before the picture of upcoming pay settlements is complete. These indicators remain part of a broader assessment: the bank said monetary policy is “not on a pre-set path” and that the committee will assess the evidence at each meeting.

Ahead of the next decision, scheduled for 17 December, data are due that could help shape the bank’s assessment of growth and inflation. The Office for National Statistics will publish its monthly estimate of gross domestic product on 12 November, followed by October consumer price inflation data on 18 November. These dates fall before the committee meeting, at which it will continue to monitor wages, pricing behaviour and energy prices. The Bank of England said the committee will assess the evidence at each meeting, leaving the path of interest rates open to data and economic developments. Attention in the coming weeks will therefore focus on whether new figures support Greene’s view that wage pressures are persisting or point to a different inflation trajectory.