By TraderVox.com
Tradervox.com (Dublin) – According to an independent review report on the performance of the Bank of England, the forecasting ability of the back have deteriorated considerably in the last five years resulting to large errors. The report indicated that this calls for a thorough investigation for the shortcomings. The report by a former Federal Reserve official David Stockton, suggested that the there is need to have more assertive staff to challenge the central bank’s house view and incorporating financial-stability risks into forecasts. The review is one of the three commissioned by the BOE’s governing council after lawmakers pushed for an independent inquiry to the affairs of the central bank. The need to have the BOE reviewed arouse as a it sought to get powers to regulate the whole financial system.
The report was released as the BOE published reports on its framework for providing liquidity to the financial system and the emergency aid to banks. According to Stockton, the Monetary Policy Committee, which is tasked with the responsibility of deciding the monetary policy to be adopted, has continued to make erred predictions after the crisis that are marginally worse than predictions of outsiders. He went ahead to propose that the bank and the MPC in particular should introspect more deeply and systematically on the lessons that can be learned from large forecast errors.
The report and comments were received well by the Bank of England Governor Mervyn King and his deputies Paul Tucker and Charles Bean. In a joint statement, the three indicated that the review has given them many ideas that they will consider as they try to improve the banks performance. The head of Parliamentary committee that scrutinizes the central bank, Andrew Tyrie said that the report is a step forward in achieving high performance but criticized the BOE management. He noted that the fact that the review took too long to be conducted shows the lack of effectiveness in central bank’s management.
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