It hires the cleverest young graduates every year. It brings in talent from around the world. And it has the budget to acquire all the resources it needs. With all this at its disposal, you would think the Bank of England could at least come up with a better excuse for its dismal record on forecasting how the economy works than blaming it all on a creaking IT system. Its response to the review published today by the former Federal Reserve chairman Ben Bernanke is not going to wash – and sooner or later the Bank will need an honest reckoning with its failings over the last decade.
Sooner or later the Bank will need an honest reckoning with its failings over the last decade
When Bernanke was appointed to review how the Bank was operating it would have been reasonable to expect him to recommend some radical changes. After all, the Bank allowed inflation to soar to four times its legally mandated target, and it looks like inflation will stay stubbornly high even as it comes down across the rest of the world. Instead, all we got was some bland technocratic changes to the way the Bank maps out the likely path of interest rates, along with some recommendations to revamp the way it collects data on the economy.
The Bank’s defence of its record is even more bizarre. Apparently the major problem is that it doesn’t have the right kind of IT to update its forecasting or to make it more accurate. Seriously? This is the ‘dog ate my homework’ level of evasion. It is hard to believe that the Bank can’t afford some better kit.
Apparently, a misguided model, filled with the wrong assumptions, had nothing to do with its forecasts, nor did packing the Monetary Policy Committee with dull nonentities all parroting the same stale messages. Like British Airways on a bad day, it was all the fault of the computers.
That is not good enough. The Bank has turned into a technocratic monster, stumbling from accident to accident, accountable to no one, and seemingly incapable of any meaningful change. If it does follow Bernanke’s advice, and order in a few new PCs, perhaps it should just leave the whole task of setting monetary policy to ChatGPT – it could hardly make a worse job of it than the current Governor Andrew Bailey and the rest of the MPC.
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