January 6, 2017: Bank of England’s chief economist has admitted that his profession is in crisis after having failed to foresee the 2008 financial crisis and having misjudged the impact of Brexit in 2016. Andrew Haldane said that the profession needed to adapt itself to the modern era in order to regain the trust of the public and politicians.
The bank has come under intense criticism for predicting a dramatic slowdown in the UK’s fortunes in the event of a vote for Brexit only for the economy to bounce back strongly and remain one of the best performing in the developed world.
Haldane admitted that the bank did not anticipate resilience of consumer spending after Brexit. However, he added that the bank has been wrong about the timing and not about the fundamentals.
“This is more a question, I think, of timing than of a fundamental reassessment of the fortunes of the economy. So back in November, we published a forecast for inflation, which was the highest we’ve ever published. And the forecast for growth in the UK economy, that was the lowest we have ever published. We are still expecting this rather difficult balancing act for monetary policy with a slowing, not a huge slowing, but nonetheless a material slowing, during the course of next year as the effects of higher prices in the shops begin to chew away a little at the spending power of consumers and cause them to rein back a little in their spending. That remains our central view, with huge amounts of uncertainty around it.”