LONDON, Sept 25 (Reuters) - The Bank of England should take a cautious approach to cutting interest rates due to the risk of longer-term inflation pressures, Monetary Policy Committee member Megan Greene said in a speech on Wednesday.

"I believe a cautious, steady-as-she-goes approach to monetary policy easing is appropriate," said Greene, who voted against the BoE's decision in August to start cutting rates.

At the time of its August rate cut, the BoE set out three scenarios for inflation, reflecting varying degrees of persistence in inflation.

Greene said she thought the middle scenario - which was used as the basis for the BoE's main forecasts - was the most likely, but saw a greater chance of the high-persistence scenario than the low-persistence one.

Some elements of services inflation had barely slowed over the past year, while wage growth remained faster than the BoE's standard economic models had predicted, she said.

Greene also saw a risk that weak consumer demand could rebound by more than the central bank has predicted.

"I believe the risks to activity are to the upside, which could suggest that the long run neutral rate is higher and - all else equal - our stance of policy isn’t as restrictive as we had thought," she said.

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https://www.reuters.com/world/uk/boes-greene-calls-cautious-approach-rate-cuts-2024-09-25/