Ex Fed chair Ben Bernanke to lead review into Bank of England forecasting
Ben Bernanke, ex-chair of the Federal Reserve, has been appointed to lead a review into the Bank of England’s forecasting during times of significant uncertainty.
The review aims to strengthen the Monetary Policy Committee’s (MPC) approach to forecasting during times of uncertainty, such as the Russian invasion of Ukraine.
Bernanke, a Nobel prize winning economist who stepped down from the Fed in 2014, said “forecasts are an important tool for central banks to assess the economic outlook. But it is right to review the design and use of forecasts and their role in policymaking, in light of major economic shocks.”
Andrew Bailey, Governor of the Bank of England, said Bernanke was a “renowned and award winning economist” who was the “ideal person” for the role.
“The UK economy has faced a series of unprecedented and unpredictable shocks. The review will allow us to take a step back and reflect on where our processes need to adapt to a world in which we increasingly face significant uncertainty,” he continued.
The appointment comes after the Bank has faced stinging criticism for failing to forecast the path that inflation would take.
For around a year and a half, monetary policy committee (MPC) officials have had to revise up their inflation projections.
That has led to sharp scrutiny of how the Bank generates its quarterly economic forecasts. Some have questioned how the MPC can set interest rates effectively if the group is unable to get a grasp of inflation, growth and unemployment.
Discussing the subject last month, chief economist at the Bank of England Huw Pill noted that the greatest weakness faced by forecasting is explaining why inflation has remained persistent following the “unprecedented” external inflationary shock following the invasion of Ukraine.