LONDON, Nov 30 (Reuters) - Bank of England interest rate-setter Megan Greene said interest rates might have to stay high for an extended period as she was more worried about persistently high inflation than some recent data suggesting the economy is in a downturn.

Greene - among the BoE's policymakers who are most worried about inflation - acknowledged the growing risk that higher borrowing costs might exacerbate some signs of weaker activity, making borrowing cost decisions "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.

Greene said she believed that the labour market might generate 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 in her speech.

In a subsequent question-and-answer session, Greene said doing too little with monetary policy was a bigger risk than doing too much, and a stronger-than-expected purchasing managers' survey published last week and resilient consumer confidence suggested the economy could be stronger than thought.

"I think that there is not only a risk of weaker activity than expected, there's also a risk of stronger activity than expected, and that's why I continue to put my focus on inflation persistence," she said.

Another risk was that tension in the Middle East could push up energy costs and inflation.

"I've been a bit surprised by pricing in the energy markets that none of that has really been priced in yet. But I do think that it's a risk," Greene said.

"As central bankers, we worry about inflation expectations becoming de-anchored," she said. "I don't think that they have been, but if we had another energy shock, then we would have inflation higher than target for even longer and there is a worry about inflation expectations becoming more de-anchored."

The BoE is widely expected to keep rates on hold on Dec. 14 after its next meeting. Investors are fully pricing a first cut only in August next year. Governor Andrew Bailey and other top officials have stressed they are not close to such a move.

https://www.reuters.com/world/uk/boes-greene-says-rates-might-need-stay-high-extended-period-2023-11-30/