A review conducted by the former head of the US central bank reveals that poor software and a bias toward small, sequential changes are among the reasons why economic forecasters at the Bank of England failed to predict and prepare for the cost of living crisis caused by high inflation.
Poor software and bias toward making only small, sequential changes are some of the reasons economic forecasters at the Bank of England failed to predict and prepare for the cost of living crisis , brought about by high inflation, according to a 'once in a generation' review.
The review announced last year was undertaken by the former head of the US central bank, known as the Fed, and said the quality of the Bank's economic expectations 'deteriorated significantly in the past few years' due to out of date software and 'excessive incrementalism'. Economic shocks 'by their nature difficult to forecast' Though the 'unusually large forecasting errors' were said to be 'probably inevitable', according to the review, conducted by Dr Ben Bernanke. The problem was not unique to the Bank, rather something all central banks and private forecasters suffered from, it said. Large and unprecedented global shocks hurt economies across the world and brought prices up. COVID lockdowns brought about supply chain shortages and bottlenecks, while the invasion of Ukraine led energy prices to soar. Such events are 'by their nature difficult to forecast', the Dr Bernanke review said. The Bank had made a number of inaccurate forecasts - such as expecting a year-long recession and not factoring in the impact of wage rises on inflation - and has been accused of failing to raise interest rates high enough or soon enough to slow inflatio
Bank Of England Economic Forecasters Cost Of Living Crisis High Inflation Review Poor Software Bias Economic Expectations Forecasting Errors Central Banks Private Forecasters Global Shocks COVID Lockdowns Supply Chain Shortages Bottlenecks Ukraine Invasion Energy Prices Inaccurate Forecasts Interest Rates Inflation
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