By David Milliken
LONDON (Reuters) – Ben Bernanke, who chaired the U.S. Federal Reserve during the global financial crisis, will lead a review of the Bank of England’s forecasting processes, the British central bank said on Friday.
British lawmakers have criticised the failure of the BoE to forecast the scale of last year’s surge in inflation, which hit a 41-year high of 11.1%, and last month the BoE said it would hold an externally led review to look for improvements.
“The review aims to develop and strengthen the Bank’s support for the Monetary Policy Committee’s approach to forecasting and monetary policy making in times of uncertainty,” the BoE said in a statement announcing Bernanke’s appointment.
Bernanke, who was awarded the Nobel memorial prize for economics last year, will be assisted by the BoE’s internal review unit and report back in the spring of 2024.
“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,” Governor Andrew Bailey said.
BoE Chief Economist Huw Pill said last month that the central bank’s main forecasting models focused on data from the past 30 years, when inflation was generally low.
Older data – covering periods when inflation was typically higher – was hard to incorporate as the structure of the economy had changed significantly. This made it difficult to forecast how fast inflation would fall now, he said.
(Reporting by David Milliken; editing by Sarah Young and Andy Bruce)
