Bank of England admits ‘very big lessons to learn’ over failure to forecast rise in inflation

Bank of England admits ‘very big lessons to learn’ over failure to forecast rise in inflation

FT says The governor of the Bank of England has conceded there are “very big lessons to learn” in setting monetary policy after the central bank failed to forecast the recent rise and persistence of inflation.

Along with other members of the BoE’s Monetary Policy Committee, Andrew Bailey told the House of Commons Treasury select committee on Tuesday that the bank’s own forecasting model was not delivering accurate results and the committee had reduced its role when setting interest rates.

“The reason we are not following ‘the model’ is because there are asymmetric effects [in the BoE’s view of the path of inflation] . . . We have taken a conscious decision to aim off [the model’s predictions],” the governor said.

He added inflation was likely to fall more gradually from March’s 10.1 per cent rate to the BoE’s 2 per cent target than the model had predicted.

https://www.ft.com/content/b972f5e3-4f03-4986-890d-5443878424ac