BoE's Greene says rates might need to stay high for extended period

LONDON (Reuters) -Bank of England interest rate-setter Megan Greene said interest rates might have to stay high for an extended period and she was more worried about signs that inflation could be persistently high than some data suggesting the economy is in a downturn.

Greene acknowledged the growing risk that higher borrowing costs might exacerbate the weakness in activity, making the BoE's decisions on borrowing costs "more finely balanced."

"But the data on output remains mixed, and I continue to worry more about inflation persistence," Greene said in the text of a speech she gave at Leeds University on Thursday.

Greene voted to keep on raising rates at the last two meetings of the BoE's Monetary Policy Committee but most of her colleagues opted to keep them at a 15-year high, after 14 back-to-back increases between December 2021 and August this year.

In her speech on Thursday, Greene said she believed that the labour market might be generating more inflation heat than in the past and the real neutral interest rate - which neither stimulates nor restricts the economy - might also be higher.

"These shifts... suggest policy may have to be restrictive for an extended period of time in order return inflation to 2% over the medium-term," she said.

(Reporting by William Schomberg; Editing by Alistair Smout)