Bank of England MPC member Megan Greene said Wednesday she was “not close” to voting for a rate hike at this month’s meeting, but her comments carried a clear warning about rising inflation risks that markets shouldn’t dismiss.

“I wasn’t tempted to hike,” Greene said at a Jefferies event. That’s notable because she’s the committee’s most hawkish voice — she voted against cuts in both December and August last year.

But the nuance matters. Greene said inflation persistence risks have risen “perhaps significantly” and that UK households may have become more sensitive to inflation shocks. She pointed to Tuesday’s Citi survey showing one-year inflation expectations surged to 5.4% in March from 3.3% in February — the biggest monthly jump in over 20 years.

She stopped short of sounding the alarm, noting the labour market is weaker than during the 2022 inflation surge, which makes wage-price spirals less automatic. Still, she acknowledged workers and companies might react faster to inflation this time around.

The geopolitical backdrop looms large. The US-Israeli conflict with Iran dominated the MPC’s discussion and Greene noted financial conditions have tightened with implications for the economy.

Market pricing has shifted dramatically — the forward market now prices in 54 bps in hikes by year end, though that’s down from three earlier this week, and a total reversal from the two cuts expected before the war.

The pound is down 14 pips today to 1.3394 in quieter trading as the market waits for clear signs on whether the war will head towards a ceasefire or escalate into a ground invasion. Cable has held relatively tight around 1.3400 since the start of the war with the US dollar and pound generally gaining against other currencies.

The next Bank of England rate decision is April 30 and that will give them plenty of time to assess the war and inflation.