Bernanke review is not about blame but the Bank's outdated practices - 0 views
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Bernanke’s 80-page assessment, the result of more than seven months’ work, is the most comprehensive independent analysis of a big central bank’s performance since an inflationary crisis hit the world economy in early 2022. He offers a dozen recommendations for change at the Bank, the strongest of which is for the MPC to begin publishing “alternative scenarios” that show how its inflation forecasts stand up in extreme situations, for example in the face of an energy price shock.
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The review lays bare how the Bank and its international peers all failed to model the impact of the huge energy price shock that followed Russia’s invasion of Ukraine in early 2022, the disruption in global trade during the pandemic after 2020 and how workers and companies would respond to significant price changes.
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In choosing Bernanke, one of the most respected central bankers of his generation, to lead the review, the Bank has ensured that his findings will be difficult to ignore. The former Fed chairman carried out more than 60 face-to-face interviews with Bank staff and market participants and sat in on the MPC’s November 2023 forecasting round to assess where the Bank’s forecasts and communication were failing short, from the use of computer models to the role played by “human judgment”.
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