The long-awaited advice from Ben Bernanke, former chair of the US Federal Reserve, will probably fall on deaf ears at the Bank of England (Report, April 13).
Bernanke’s solutions of diversifying models through increasingly qualitative descriptions are sensible. Unfortunately, the BoE’s response to these recommendations looks dismal. Instead of focusing on diversification of thought — a necessary condition for making alternative models and scenarios — the BoE has instead chosen to focus on operational targets regarding the structure of their models.
However, there is a difference between predicting the right trajectory with big errors and predicting the completely wrong one. As a reminder, BoE forecasts claimed the pandemic to be disinflationary. We now know these predictions were quite detached from reality.
No improvements in the structure of models could fix this. The BoE failed to see the right trajectory of the pandemic because of their ignorance of money growth and other heterodox modelling approaches, not because of fan charts.
What the BoE desperately needs is a culture change. Without one, we are afraid that Bernanke’s contributions will leave no noticeable change in attitudes towards monetary policy.
Nicolas Padula
Hubert Kucharski
Leeds Policy Institute (student-run think-tank), Leeds, West Yorkshire, UK
