The Bank of England has faced significant criticism from former US Federal Reserve chairman Ben Bernanke for its reliance on outdated technology in economic forecasting.
Bernanke, who led the Fed from 2006 to 2014, was commissioned to carry out an independent review of the UK central bank’s operations and policies due to its inability to prevent inflation during 2022 and 2023. His report highlights failures in monetary policy, poor communication, and a “strikingly technocratic” approach to staffing, but places particular emphasis on the bank’s technological shortcomings.
He points out a “material under-investment” in forecasting tools, alongside an over-reliance on makeshift solutions that have led to a “complicated and unwieldy system.” As a result, bank staff have been forced to use “human judgments that paper over problems with financial models.”
Bernanke’s report calls for increased investment in software and a complete overhaul or replacement of the bank’s economic model, known as Compass. He recommends incorporating “more qualitative descriptions of risks and uncertainty surrounding the outlook.”
In May, Bernanke is scheduled to appear before the all-party Treasury committee of parliament members to discuss his findings.