MNI POLICY: Time Needed For BOE To Make Bernanke Changes

While a review into Bank of England forecasting headed by former Federal Reserve head Ben Bernanke has called for comprehensive reforms including scrapping fancharts and recommended the publication of an in-house rate path projection, significant changes are unlikely to be seen in the next couple of Monetary Policy Reports at least.

While some of Bernanke’s proposed changes, such as providing briefer, more qualitative summaries of forecasts and risks, are relatively simple to enact, it will take time to implement others, and to come up with a single in-house rate path, if it is decided to do so, particularly given the diversity of views among Monetary Policy Committee members and senior Bank staff.

The Bank, while accepting Bernanke's proposals, has only committed to providing "an update on proposed changes by the end of the year." (See MNI: Bernanke Review Tells BOE To Shift To Scenario Analysis)

ALTERNATIVE SCENARIOS

Bernanke came out strongly in favour of the publication of alternative scenarios to the BOE’s central economic projection. Time and resources will be required to prepare these and the MPC would have to agree on when to discuss these new tools during forecast rounds. (See MNI INTERVIEW: Clear Case For BOE Alternative Scenarios - Bean)

In its public response to Bernanke, the Bank noted interlinkages between his proposals, stating that they could impact "many aspects of the monetary-policy-making process including infrastructure, models, staffing, the internal processes for production and discussion of the forecast and policy strategy."

The former Fed head also highlighted shortfalls in the Bank's information technology and how its forecast staff are stretched thin, none of which are issues which can be resolved immediately.

In testimony to the Treasury Select Committee this week, incoming BOE Deputy Governor Clare Lombardelli, who starts in July, said she would work on implementation of the Review but that she had not come to a view on whether it was desirable to publish an in-house rate projection, citing boiler-plate pros and cons.