LONDON (Reuters) - The Bank of England has agreed to improve its forecasting record after its shortcomings were highlighted last year by three external reviews.
The central bank said on Thursday it was “minded to take forward almost all” of 71 proposals contained in the reviews, which ranged from forecasting to liquidity provision.
The bank’s oversight body asked for outside scrutiny last year after criticism that it had been too slow to provide liquidity at the start of the financial crisis, and that its forecasts on growth and inflation had persistently proved too optimistic.
Inflation has exceeded the bank’s 2 percent target for most of the past five years.
The bank said it would also publish numerical details about the judgements underpinning its economic forecasts.
The review of the forecasting record - conducted by former Federal Reserve official David Stockton - also focused on measures to avoid the “inertia” and “group think” to which regular forecasting exercises are typically prone.
The bank agreed to publish more alternative scenarios, and to take a systematic look, when forecasts proved wide of the mark, as to the reasons why.
Progress on all these measures should be made in time for the bank’s quarterly inflation report due in August, it said.
The bank also said that in future it would be more ready to provide liquidity to financial institutions if needed. The bank noted, however, that most of the recommendations in the reviews on liquidity provision had already been implemented or were planned.
Expectations are running high that bigger reforms may be in the offing with Bank of Canada Governor Mark Carney due to replace Mervyn King at the bank’s helm in July.
The government renews the central bank’s remit in its annual budget. It could seize the opportunity next week to give the bank a more explicit role to support growth although many economists expect only a small change or just the start of a review process.
Reporting by Christina Fincher; editing by William Schomberg