Bank of England Acknowledges Flaws in Forecasting Amidst Inflation Crisis
Bank of England Acknowledges...
Subscribe to Newsletter

Bank of England Acknowledges Flaws in Forecasting Amidst Inflation Crisis

28 June 2023
2 min.
Bank of England Acknowledges Flaws in Forecasting Amidst Inflation Crisis

Revamping Predictions

Bank of England's chief economist, Huw Pill, acknowledges forecasting model's failure in addressing Britain's inflation crisis due to inadequate assessment of Ukraine war's impact on prices and wages.

Inadequate Forecasting Model

In a speech at the ECB forum, Pill highlighted that the Bank's model lacked consideration for persistent inflation and the Ukraine conflict's cascading impacts. Inflation expectations were stable and long-lasting inflation was rare in the previous period.

Controversial Interest Rate Hike

The Bank's decision to increase interest rates to a 15-year peak of 5% has drawn scrutiny and criticism. Governor Andrew Bailey defended the move, citing an unexpectedly negative inflation report as justification. However, Tory MPs accused Bailey and his team of negligence as inflation steadily rose in recent years.

External Review and Calls for Change

In response to the interest rate hike and the forecasting model's shortcomings, the Bank announced an external review of its own forecasting practices. Senior Tory MP John Redwood welcomed this review, suggesting that the existing model needs substantial changes. Other senior Tories, including Jacob Rees-Mogg and Sir Jake Berry, continued their criticism, calling for a reevaluation of the Bank's leadership and strategy.

Support and Challenges

Chancellor Rishi Sunak supports Bailey and defends Bank's anti-inflation approach. Sunak could face election pressure if inflation target missed. Chancellor meets regulators for pricing fairness, IMF backs UK's inflation reduction plans.

Regulatory Measures

After the meeting, the Treasury took action to address pricing fairness concerns. The CMA accelerated its fuel pricing review and pledged to investigate supermarket pricing sooner. The Financial Conduct Authority will ensure higher interest rates benefit savers by assessing the savings market. Banks and building societies must explain interest rate strategies and assist savers in switching to higher-rate products.

Bailey's Justification

During the ECB forum, Bailey emphasized that the decision to hike interest rates was justified by higher-than-expected inflation figures, reaching 8.7%. The cumulative data, especially regarding the labor market and inflation, indicated signs of persistence, prompting the Bank to take decisive action.

Persons6 and Companies5 in the news

British Conservative Party politician
1 place
chief economist of the Bank of England
2 place
British politician
3 place
Governor of the Bank of England since 16 March 2020.
4 place
Secretary of State for Business, Energy and Industrial Strategy
5 place
Chancellor of the Exchequer
6 place
Bank of England
4 place
Rating companies
18 Mention
12 Mention
Daily Mail
9 Mention
Labour Party
6 Mention
X (Twitter)
6 Mention
Channel 4
6 Mention
The Sun
6 Mention


News -this is the latest and most up-to-date information about the resonant events that have occurred in the region. The task of the resource's news feed is to convey to readers information about important events in business, politics, economics, healthcare, culture and other spheres of life in England with maximum accuracy and objectivity.
News - this is coverage of the economic processes taking place in England, the latest news of public life, incidents and an overview of political events. English news is information about the activities of small and medium-sized businesses, the work of housing and communal services, the implementation of significant projects. The site's journalists describe not only the life of the region, but also talk about the current state of the English economy. Everything you need to know about innovations in the field of industry and agriculture, economy and government is collected in the "News" section on
News of England promptly informs the reader, shows the real picture and opens up topical topics. Communication with government structures and business gives us the opportunity to provide our readers with reliable, information-rich material.
The main page of the portal contains the key news of England!
Alena Potapova

Development Director
Died this year
Born this year