The Bank of England’s economic forecasting model has become “unworkable”, the Bank’s chief economist has admitted
Forecasting tools were ‘unworkable’ as high inflation and low unemployment united to mess up Bank of England’s predictions of how long the crisis would last
Huw Pill told a conference of central bankers in Portugal that the tools the Bank used to understand what was happening in the UK economy failed to accurately anticipate the effect that“As inflation moves away from target, the everything-else-equal assumption that allows us to break down the contributions to the drivers of inflation in a linear way tends to become unworkable,” he said.
Andrew Bailey, the Bank’s governor, later said that UK labour market data and the high core inflation figure was the reason the“The cumulative data – both particularly on the labour market and on the inflation release we had, which to us showed clear signs of persistence – caused us to conclude that we had to make really quite a strong move,” Bailey said.
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