Mr Bailey acknowledged that the Bank needed to “adapt and evolve”; – but did not apologize. Photo: Justin Tallis/AFP
Mr Bailey said: “It is likely that the global economic situation will continue to be challenging and less predictable than it has been in the past.”
“So we need to adapt, evolve and ensure our outlook is as good as possible.”
Mr Bailey also hinted that the Bank's communications would be shorter and clearer. forward.
Mr Bernanke's review recommended replacing or “at least completely overhauling” the Bank's core economic model, as he warned it did not adequately capture shocks in the energy or financial sectors.
“The underlying economic model has significant weaknesses,” the review says.
How the Bank of England was wrong in its forecasts – again and again Read more
“These shortcomings in the system, as well as many temporary Corrections over the years have resulted in a complex and cumbersome system that limits staff's ability to conduct useful analysis.”
Mr. Bernanke's review also noted that the market movements used to support his forecasts were often out of date by the time the Bank published its forecasts.
“Outdated quotes do not necessarily reflect market or MPC expectations for rates today . political decision,” Mr. Bernanke said.
It also noted that the Bank and policymakers also have a “tendency to predict too rapid a return of the economy to its sustainable equilibrium,” including a 2% inflation target, established by the Bank.
The report also talks about staff incentives. were currently incorrect, which threatened to deprive the Bank of experience in key areas.
“Many employees believe that the best route to promotion and salary increases is to move to a new job or division, accepting taking on new responsibilities. rather than demonstrating consistent excellence in a particular position,” the report states.
Ben Bernanke said the Bank's forecasting errors could undermine its credibility. Photo: SHAWN THEW/EPA-EFE/Shutterstock
Mr Bernanke noted that Fed staff often have “decades of experience in their field” compared to the average experience. at the Bank for “about three years”.
The Bank has promised a thorough overhaul of forecasting methods.
This includes a “modern approach to eliminating forecasting errors”. assessment and a process to ensure that the results of such assessments lead to improved models and methods.”
Officials are already “investigating the sources and nature of recent forecast errors,” the Bank said.
The Bank also said it would seek to build expertise in forecasting, rather than encouraging them to move from one division to another for career advancement.
This means “developing incentives for experienced staff to lead model development and investment activities in infrastructure, as well as provide opportunities for progress through the accumulation of experience.”
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