Former US Federal Reserve Chair Ben Bernanke criticises the Bank of England’s economic forecasting, proposing changes and triggering a defense from incoming deputy governor Clare Lombardelli amid global economic uncertainties.
Ben Bernanke, former chair of the US Federal Reserve, recently critiqued the Bank of England’s economic forecasting methods in a published report. He highlighted shortcomings including the need for restructuring the bank’s economic models and enhancing data quality. Bernanke also pointed out that a significant number of PhD holders at the bank spend minimal time on its core functions, suggesting a potential misalignment with non-academic objectives. Additionally, he recommended that the bank should move away from relying solely on central forecasting and instead consider alternative scenarios.
In response to the Bernanke report, Clare Lombardelli, the incoming deputy governor of the Bank of England, defended the Office for Budget Responsibility (OBR) and dismissed suggestions to abolish it. Lombardelli highlighted the need for improvements in the bank’s forecasting capabilities following Bernanke’s review. Former Prime Minister Liz Truss had previously urged for the OBR to be scrapped and for Bank of England governor Andrew Bailey to resign.
In the US, Vice Chair of the Federal Reserve, Philip Jefferson, hinted that interest rates might need to remain high to combat ongoing inflation, reversing earlier indications of potential rate cuts. This stance reflects concerns over persistent high inflation and an economy exhibiting robust consumer spending.
These developments come amid broader discussions on economic forecasting and monetary policies by central banks in the face of global economic uncertainties. The effectiveness and transparency of economic forecasting by central banks, as highlighted by Bernanke, remain crucial for market stability and policy effectiveness.
