Bank sends Ben Bernanke to correct his ‘failed’ inflation forecasts

The Bank of England has called on the former head of the US Federal Reserve to review how she prepares economic forecasts.

Ben Bernanke, who headed the US Federal Reserve from 2006 to 2014, will look at how Threadneedle Street staff put together their forecasts.

The move comes after the bank failed to cope with the rise in inflation, with Governor Andrew Bailey and his colleagues initially labeling rising prices as “transient.”

Unlike the US, the UK has been slow to raise interest rates, meaning inflation was 7.9 percent in June, higher than many of its counterparts in the G7 group of leading world economies.

The bank said the review aims to “develop and strengthen” the decisions of its rate-setting Monetary Policy Committee and its inflation forecasts. It will publish the findings in the spring. ‘Dr. Bernanke is a renowned and award-winning economist whose distinguished career makes him the ideal person to lead this review,” said Bailey.

The UK economy has been through a series of unprecedented and unpredictable shocks. The review allows us to take a step back and reflect on where our processes need to adapt to a world where we are increasingly confronted with great uncertainty.”

Bernanke said: “Forecasts are an important tool for central banks to assess the economic outlook. But it is good to review the design and use of forecasts and their role in policy making in light of major economic shocks. I am therefore delighted to lead this work.’

The Bank announced plans for a review last month after criticism that it had not accurately predicted the rise in inflation.

Bernanke, 69, led the Fed through the global financial crisis and is credited with starting its massive money-printing program to revive the US economy after the crash.

Last year he was awarded the Sveriges Riksbank Prize, often referred to as the Nobel Prize in Economics, for his work on the psychology of bank runs.