‘Significant shortcomings’ in Bank of England’s forecasting, finds Bernanke

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“Significant shortcomings” in the Bank of England’s economic forecasting record have undermined its ability to control inflation, an independent review has warned.

The review, led by former Federal Reserve chairman Ben Bernanke, warned the accuracy of the Bank’s predictions had “deteriorated significantly” in the wake of the pandemic.

The US central banker said this had resulted in “deficiencies” in Threadneedle Street’s ability to predict the impact of economic shocks such as Russia’s invasion of Ukraine.

While his review noted this was not unique to the Bank of England, Mr Bernanke noted that this risked damaging its credibility.

The review warned the Bank’s main economic model was no longer fit for purpose, adding that staff were wasting too much time on “laborious” administration tasks that limited their time for crucial economic analysis.

Welcoming the report’s dozen recommendations, Andrew Bailey admitted that the Bank needed to “adapt and develop” its forecasting process for the modern age as he vowed to learn from the Bank’s mistakes.

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