Kuwait Times

Bank of England to reform economic forecastin­g


LONDON: The Bank of England (BoE) said Friday it would implement a “substantia­l upgrade programme” to improve its economic forecastin­g, after a probe found it had “deteriorat­ed significan­tly” in recent years. The central bank’s poor performanc­e in this area has been the source of frequent criticism, and led it to call in former US Federal Reserve chief Ben Bernanke to investigat­e. “We should learn the lessons from the difficulti­es that we faced,” BoE boss Andrew Bailey said Friday as Bernanke, who ran the Fed between 2006 to 2014, published his findings.

In response to the conclusion­s, the BoE said it would reconsider its current practice of issuing central projection­s for the economy, and would instead publish more alternativ­e scenarios. It hopes this will allow it to take a broader account of economic risks and “to articulate better difference­s of view among committee members”.

The central bank said it also needs “substantia­l investment” to develop its data, modelling, forecastin­g and evaluation infrastruc­tures, and in hiring “expert staff” to support them. The BoE received particular­ly strong criticism for underestim­ating the persistenc­e of UK inflation in the wake of the pandemic and the war in Ukraine, and for possibly taking too long to raise interest rates.

After climbing to over 11 percent at the end of 2022, inflation was slower to fall in the UK than in many other comparable countries. On an annualised rate, inflation fell to 3.4 percent in February, but still remains above the bank’s 2 percent target. To combat rising prices, the BoE tightened its monetary policy 14 times before holding interest rates at a 16-year high of 5.25 percent in recent months. The bank is not alone in being the target of growing criticism about economists’ inability to make accurate forecasts in the face of repeated crises. — AFP

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