- Ben Bernanke to Oversee Evaluation of Bank of England’s Forecasts
- Bank of England Faces Criticism Over Inflation Predictions
- Dr. Bernanke’s Appointment Aims to Address Forecasting Challenges
Former US Federal Reserve Chairman Ben Bernanke will oversee an assessment of the Bank of England’s forecasts.
The appointment comes at a time when the Bank is being criticized for its efforts to curb rising prices and its inability to predict their rise.
Once, the Bank anticipated that inflation would climax at 6%. It reached 11.1% last year and remains elevated at 7.9%.
Andrew Bailey, governor of the bank, stated that the evaluation would permit the institution to “step back and reflect.”
In announcing Dr. Bernanke’s appointment, he stated, “The British economy has experienced a series of unprecedented and unforeseen shocks.”
“The review will allow us to take a step back and reflect on the areas in which our processes must adapt to a world in which significant uncertainty is growing”
Dr. Bernanke, who steered the U.S. economy through the 2008 financial crisis as chairman of the Federal Reserve from 2006 to 2014, stated that he was “delighted” to have been selected for the position.
“Forecasts are an important tool for central banks to assess the economic outlook,” he said.
In light of major economic shocks, it is necessary to examine the design and application of forecasts, as well as their function in policymaking.
The Bank is scheduled to convene the following week to consider a fourteenth rate increase.
The markets and economists anticipate that the Bank will increase its key rate by a quarter of a percentage point to 5.25 percent, the highest level since 2008.
The measures are intended to stabilize prices, which have soared in recent years as a result of a variety of factors, including the conflict in Ukraine, which disrupted global oil and food markets.
The constraints have proven to be considerably more enduring than the Bank initially anticipated.
When the Fed raised interest rates in December 2021, it forecasted 6% inflation in April 2022.
Even after petroleum prices dropped last month, the current rate remains above the 2% rate targeted by the Bank.
In May, Mr. Bailey said there were “huge lessons” from the central bank’s response to recent economic disturbances.
He stated that the bank’s internal forecasting failures had prompted it to seek outside assistance in formulating policy.
The Bank’s internal evaluation unit will assist Dr. Bernanke, who received the Nobel Memorial Prize in Economics in 2022.
Their work is scheduled to begin this summer, but not before Wednesday’s upcoming interest rate decision by the Bank. Next spring, he is anticipated to report back.
