Bloomberg: Bank of England the worst central bank in forecasting

No central bank is perfect when it comes to forecasting; however, the Bank of England is definitely among the worst. According to Bloomberg’s ranking, this three-century-old institution has the poorest results regarding inflation forecasts for the British economy. On the other hand, the Bank of Canada tops the list.

Unlike the European Central Bank and the U.S. FED, the Bank of England is prone to misforecasting consumer prices, although the situation has been improving slightly lately. For eight consecutive years, until 2013, inflation was underestimated by 1.3 percentage points, while after that, they overestimated it by about 1.1 percentage points.

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Such errors raise questions about the credibility of the central bank, which should provide a basis for monetary policy decisions affecting businesses and households in the real sector. The Bank of England raised the benchmark interest rate for the first time in over a decade, arguing that there are significant prospects for inflation to emerge.

Incorrect forecasts are just one in a series of evidence against the leadership of the central bank. Monetary institutions could face criticism as the measures used to mitigate the crisis have actually increased inequality.

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In compiling the results, Bloomberg took into account inflation projections from the last two years and GDP growth estimates, comparing them with results from 2006-2016.

When considering overall measures, the FED ranks first, while the Bank of Japan is at the bottom. In terms of economic growth forecasts, the Bank of England hoped to top the list, but it turned out they were consistently overly optimistic.

Andy Haldane, the chief economist of the Bank of England, stated last year that he expects a sharper slowdown in economic activity than that which occurred when the Brexit decision was made.