‘Once in a generation’ review reveals why Bank of England keeps getting its forecasts wrong
Poor software and bias toward making only small, sequential changes is one of the reasons economic forecasters at the Bank of England failed to predict and prepare for the cost of living crisis, brought about by high inflation, according to a “once in a generation” review.
The review announced last year was undertaken by the former head of the US central bank, known as the Fed, and said the quality of the Bank’s economic expectations “deteriorated significantly in the past few years” due to out of date software and “excessive incrementalism”.
Economic shocks ‘by their nature difficult to forecast’
Though the “unusually large forecasting errors” were said to be “probably inevitable”, according to the review, conducted by Dr Ben Bernanke.
The problem was not unique to the Bank, rather something all central banks and private forecasters suffered from, it said.
Large and unprecedented global shocks hurt economies across the world and brought prices up.
COVID lockdowns brought about supply chain shortages and bottlenecks, while the invasion of Ukraine led energy prices to soar.
Ben Bernanke. Pic: Reuters/Ken Cedeno
Such events are “by their nature difficult to forecast”, the Dr Bernanke review said.
The Bank had made a number of inaccurate forecasts – such as expecting a year-long recession and not factoring in the impact of wage rises on inflation – and has been accused of failing to raise interest rates high enough or soon enough to slow inflation.
Interest rates have now been risen to a 2008 financial crisis-era high of 5.25% in an effort to draw money out of the economy and dampen activity.
One of the ‘most serious problems’
One of the “most serious problems” with forecasting at the Bank, the review said, is “key software is out of date and lacks important functionality”.
There’s been “material under-investment” due to short term pressures at the Bank, Dr Bernanke said.
“Major financial investment” is needed to fund upgrades, the review said, though sums were not discussed.
New ways of doing things
New ways of forecasting should also be adopted, according to Dr Bernanke’s report.
To be more accurate, the Bank should model for various economic scenarios, including if wage prices were to rise.
Greater attention should be paid regularly reviewing supply chains, jobs market supply and trade policy.
Modelling should also be done for other sectors that impact the economy, including the financial, housing, and energy sectors.
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The Bank welcomed the review, with Mr Bailey saying work to implement the recommendations has already begun.
It will take “some time”, however, to develop detailed plans before they can even be implemented, he added.
No timeline for adoption has been given, though Mr Bailey said “a phased approach to implementing changes is likely to be appropriate for a programme of this scale”.
Mr Bailey admitted last year there were “very big lessons” to learn about how the central bank had dealt with the economic shocks of recent times.
Dr Bernanke steered the world’s largest economy through the financial crisis of 2008 while at the helm of the Federal Reserve.
Sir Keir Starmer has joined other European leaders in Kyiv to press Russia to agree an unconditional 30-day ceasefire.
The prime minister is attending the summit alongside French President Emmanuel Macron, recently-elected German Chancellor Friedrich Merz and Polish Prime Minister Donald Tusk.
It is the first time the leaders of the four countries have travelled to Ukraine at the same time – arriving in the capital by train – with their meeting hosted by President Volodymyr Zelenskyy.
Sir Keir Starmer, Emmanuel Macron and Friedrich Merz travelling in the saloon car of a special train to Kyiv. Pic: Reuters
Leaders arrive in Kyiv by train. Pic: PA
It comes after Donald Trump called for “ideally” a 30-day ceasefire between Kyiv and Moscow, and warned that if any pause in the fighting is not respected “the US and its partners will impose further sanctions”.
Security and defence analyst Michael Clarke told Sky News presenter Samantha Washington the European leaders are “rowing in behind” the US president, who referred to his “European allies” for the first time in this context in a post on his Truth Social platform.
“So this meeting is all about heaping pressure on the Russians to go along with the American proposal,” he said.
“It’s the closest the Europeans and the US have been for about three months on this issue.”
Sir Keir Starmer, Volodymyr Zelenskyy and Emmanuel Macron among world leaders in Kyiv. Pic: AP
Trump calls for ceasefire. Pic: Truth Social
Ukraine’s foreign minister Andrii Sybiha said Ukraine and its allies are ready for a “full, unconditional ceasefire” for at least 30 days starting on Monday.
Ahead of the meeting on Saturday, Sir Keir, Mr Macron, Mr Tusk and Mr Merz released a joint statement.
European leaders show solidarity – but await Trump’s backing
The hope is Russia’s unilateral ceasefire, such as it’s worth, can be extended for a month to give peace a chance.
But ahead of the meeting, Ukrainian sources told Sky News they are still waiting for President Donald Trump to put his full weight behind the idea.
The US leader has said a 30-day ceasefire would be ideal, but has shown no willingness yet for putting pressure on Russian president Vladimir Putin to agree.
The Russians say a ceasefire can only come after a peace deal can be reached.
European allies are still putting their hopes in a negotiated end to the war despite Moscow’s intransigence and President Trump’s apparent one-sided approach favouring Russia.
Ukrainians would prefer to be given enough economic and military support to secure victory.
But in over three years, despite its massive economic superiority to Russia and its access to more advanced military technology, Europe has not found the political will to give Kyiv the means to win.
Until they do, Vladimir Putin may decide it is still worth pursuing this war despite its massive cost in men and materiel on both sides.
“We reiterate our backing for President Trump’s calls for a peace deal and call on Russia to stop obstructing efforts to secure an enduring peace,” they said.
“Alongside the US, we call on Russia to agree a full and unconditional 30-day ceasefire to create the space for talks on a just and lasting peace.”
Sir Keir and Volodymyr Zelenskyy during a meeting in March. Pic: AP
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Putin’s Victory Day parade explained
The leaders said they were “ready to support peace talks as soon as possible”.
But they warned that they would continue to “ratchet up pressure on Russia’s war machine” until Moscow agrees to a lasting ceasefire.
“We are clear the bloodshed must end, Russia must stop its illegal invasion, and Ukraine must be able to prosper as a safe, secure and sovereign nation within its internationally recognised borders for generations to come,” their statement added.
“We will continue to increase our support for Ukraine.”
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The European leaders are set to visit the Maidan, a central square in Ukraine’s capital where flags represent those who died in the war.
They are also expected to host a virtual meeting for other leaders in the “coalition of the willing” to update them on progress towards a peacekeeping force.
Military officers from around 30 countries have been involved in drawing up plans for a coalition, which would provide a peacekeeping force in the event of a ceasefire being agreed between Russia and Ukraine.
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This force “would help regenerate Ukraine’s armed forces after any peace deal and strengthen confidence in any future peace”, according to Number 10.
A special constable has been jailed after taking pictures on his phone from bodycam footage showing a dying man.
Former police volunteer William Heggs, 23, was sentenced to 12 months’ imprisonment at Leicester Crown Court on Friday after showing the photos of victim William Harty, 28, to a female colleague and storing them on his Snapchat account.
Mr Harty was found seriously injured in a residential street in Leicester on 25 October 2021 and Heggs had attended the scene, helping with CPR before paramedics arrived.
Mr Harty died in hospital a day later and the man responsible for his injuries, his brother-in-law Martin Casey, was subsequently convicted of his manslaughter.
Heggs showed the pictures he had taken of bodycam footage of Mr Harty’s body to a Leicestershire Police constable, who reported Heggs and said she did not like seeing blood.
His phone was seized and officers discovered other photographs and video clips of bodyworn footage of incidents Heggs had attended on duty, including of a knife seizure, use of baton and pepper spray, and a man with an injured hand receiving first aid.
He also took pictures of a police computer screen, showing details of crimes and suspects, without consent.
Heggs stored the materials in a Snapchat folder and disclosed graphic details – most of which were not in the public domain – about the injuries to a woman who was killed in a road traffic collision he had attended, to a friend on the social media platform.
Heggs was suspended from the force in November 2021 and resigned in October 2024 before pleading guilty to 11 computer misuse and data protection offences this March.
William Harty’s widow Mandy Casey. Pic: PA
‘He has traumatised me’
Mr Harty’s widow, Mandy Casey, said in a victim impact statement read to the court that Heggs “took (her) husband’s dignity when he was most vulnerable”.
“You don’t take someone’s dignity and pride from them on their deathbed.”
She continued: “When I found out special constable Heggs had done this, I just wanted to ask why. He has traumatised me. I feel I will never know if he showed them to others.”
Ms Casey said she was still scared that photos of her husband’s body might appear on social media.
She added that she had lost trust in the police.
Public trust in police ‘significantly undermined’
Judge Timothy Spencer told Heggs, who has autism and ADHD, that he was “probably too immature to be working as a police officer” as he handed down the sentence.
He said Heggs had received “extensive training”, including on the importance of data protection, and knew he should only share materials for “a genuine policing purpose”.
Heggs’s actions had “significantly undermined” public trust and confidence in police, according to the judge.
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Malcolm McHaffie, from the Crown Prosecution Service, added: “William Heggs abused the public’s trust in the office he held as a special police constable.
“He violated the dignity of the deceased victims for no apparent reason other than what could be considered personal fascination and to gain credibility among his peers.”
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