Odd Lots The Bank of England's Megan Greene on Monetary Policy in a World of Supply Shocks
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May 11, 2026 
Megan Greene, external member of the Bank of England's Monetary Policy Committee and international economist, discusses repeated supply shocks and their compounding effects. She covers why policymakers may hold rates despite weak growth, how second‑round wage‑price dynamics matter, cross‑border spillovers, mortgage transmission differences, and the limits of monetary policy in fixing supply constraints.
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UK Growth Is Weak On Demand And Supply
- The UK economy is weak on both demand and supply sides, with underlying GDP growth around 0.2% per quarter.
- Megan Greene notes monthly GDP volatility but persistent weak underlying growth and fragile supply capacity since she joined the MPC.
Inflation Persistence Was Building Before New Energy Shock
- Multiple past shocks left inflation above target and forward indicators were stalling, raising persistence risk before the Iran shock.
- Greene cites DMP business surveys showing one-year price and wage expectations stopped falling, signalling lingering inflationary momentum.
People Notice Inflation Sooner And Firms Pass Costs Faster
- Households now notice inflation at lower thresholds (~3–3.5%), and firms use more state-dependent pricing, increasing pass-through speed.
- Research shows people are more sensitive to upside inflation surprises than downside ones, amplifying risks.