Former US Federal Reserve chair to lead Bank of England review on economic forecasts

Former Federal Reserve Chairman Ben Bernanke, center, accompanied by Federal Reserve Chairman Jerome Powell, left, speaks during the Thomas Laubach Research Conference at the William McChesney Martin Jr. Federal Reserve Board Building in Washington, on May 19, 2023. Bernanke will lead a review of the Bank of England’s economic forecasting amid concern that inaccurate predictions about growth and inflation hampered the central bank’s efforts to combat Britain’s cost-of-living crisis. (AP Photo/Andrew Harnik, File)

LONDON (AP) — Former U.S. Federal Reserve Chairman Ben Bernanke will lead a review of the Bank of England’s economic forecasting amid concern that inaccurate predictions about growth and inflation hampered the central bank’s efforts to combat Britain’s cost-of-living crisis.

Bernanke, who served as Federal Reserve chair from 2006-2014, will examine how procedures and analysis affected the decisions of the bank’s Monetary Policy Committee, which has approved 13 consecutive interest rate increases as it battles stubbornly high inflation. Some business leaders and government officials have suggested the bank’s response to the crisis was hamstrung by overly pessimistic forecasts of a recession that never materialized and overly optimistic expectations for a rapid drop in inflation.

“The UK economy has faced a series of unprecedented and unpredictable shocks,’’ Bank of England Gov. Andrew Bailey said in a statement. ‘‘The review will allow us to take a step back and reflect on where our processes need to adapt to a world in which we increasingly face significant uncertainty.”

While Britain’s inflation rate has dropped sharply after peaking at 11.1% in October, it remains higher than in the U.S. and European Union. The U.S. inflation rate fell to 3% last month after peaking at 9.1% in June of 2022.

Bernanke, now a senior fellow at the Brookings Institution, oversaw the Fed in the years immediately after the 2008 financial crisis, a time of unprecedented turmoil in the global economy.

“Forecasts are an important tool for central banks to assess the economic outlook,’’ Bernanke said in the statement. “But it is right to review the design and use of forecasts and their role in policymaking, in light of major economic shocks.”