Bank of England's Greene says later start to rate cuts better, FT reports

That is more than the 44 bps of U.S. rate cuts priced in by investors, with the first cut from the Fed expected in September. The BoE policymaker said that difference in labour supply between the two countries is also stark and UK services inflation remains much higher than in the United States.

Bank of England policymaker Megan Greene said that markets now expect the central bank will cut rates earlier and by more than the Federal Reserve this year, arguing that a later start to policy easing in Britain is better, Financial Times reported on Thursday.

"Following surprisingly strong U.S. March CPI inflation, markets now expect the Bank of England will cut rates earlier and by more than the Federal Reserve this year," Greene wrote in an opinion piece published in the newspaper. In the article titled "Markets must stop comparing the UK and the U.S.", Greene wrote the persistence of inflation is a greater threat for Britain than the U.S.

"In my view, rate cuts in the UK should still be a way off as well," she said. Money markets expect 56 basis points of interest rate cuts by the BoE this year and see a 52% chance of the first cut arriving in June, according to LSEG data. That is more than the 44 bps of U.S. rate cuts priced in by investors, with the first cut from the Fed expected in September.

The BoE policymaker said that difference in labour supply between the two countries is also stark and UK services inflation remains much higher than in the United States. "Overall labour market participation in the UK has not recovered to the pre-pandemic trend. Participation in the U.S., on the other hand, has exceeded the pre-COVID trend."

Higher inflation expectations have translated into higher pay growth, by some metrics now between 6-7% in the UK versus 4-5.5% in the U.S., Greene said adding that it will need to slow further to see services inflation return sustainably to target-consistent levels.

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