BOE Forecasting Models ‘Unworkable’ In a Price Shock, Pill Says
- Review to focus on failure to anticipate second-round effects
- UK faces more persistent inflation than other major economies
Huw Pill in Sintra on June 28.
Photographer: Sergio Garcia/ECBThis article is for subscribers only.
The Bank of England failed to forecast the scale of the UK’s inflation shock because its assumptions become “unworkable” in a crisis and its model underplays the interaction of high energy prices and a tight labor market, Chief Economist Huw Pill said.
Pill was speaking at the ECB forum in Sintra just days after the BOE announced an external review of its forecasting process following repeated failures to anticipate the persistence of inflation. UK price growth has come down far more slowly than expected and remains higher than other major economies as pay continues to climb.