Bernanke Tapped to Find Out Why U.K. Central Bank Misjudged Inflation

livemint.com:

LONDON—The Bank of England has named Ben Bernanke, a former chair of the Federal Reserve, to review its economic forecasting record, one of the first steps taken by a leading central bank to understand why they underestimated a surge in prices that began more than two years ago and dented living standards. Consumer prices started to rise rapidly in early 2021 as economies around the world began to reopen after the Covid-19 pandemic. As demand for goods and services rebounded, supply chains were hampered by lockdowns that continued in key parts of the global economy through last year.

Prices surged further after Russia’s invasion of Ukraine led to a spike in energy costs, causing U.K. inflation to peak at 11.1% in October of last year. The U.K.’s annual rate of inflation now stands at 7.9%, almost four times the BOE’s target, and has proved stubbornly high.

In May 2021, as prices began to surge, the central bank forecast that inflation would be around 2% in the three months through June of this year. “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," said BOE Gov. Andrew Bailey.

The central bank said the findings of the review will be published in spring 2024. With households facing the steepest fall in real incomes since the 1950s, the U.K.’s central bank has faced criticism of its forecasting record and the speed of its response to surging prices. In June, a committee of lawmakers called for a review of its forecasting process and the BOE has acknowledged that it has made mistakes.