conomic forecasting is a mug’s game.
Get it wrong and you’re pelted from all sides (including these pages). Get it right and your success usually goes unnoticed.
Andrew Bailey and his crew at the Bank of England are used to this. Their consistent underestimating of inflation last year ensured a right kicking from all and sundry.
Last week’s dire forecasts for the UK economy are sure to prove as controversial as ever. Inflation is seen peaking at 10% — in line with the private sector’s biggest pessimists — millions will lose their jobs and we are heading for, at best, years of flatlining economic growth. At worst, a recession.
The pound tanked last week after the bleak prognosis and took another tumble today.
Could it really be that bad? Some in the City think the Bank is now overestimating peak inflation because, they argue, it seems unthinkable politicians could really do nothing to help households with the energy crisis.
Maybe so, but the Bank can only forecast based on the cards dealt so far. To assume Government intervention would be political and hugely controversial.
Still, if the state does step in and the worst is avoided some may say the Bank looks foolish.
Forecasting, while thankless, is necessary for policy-making and planning. It is difficult at the best of times but even more so now. The pandemic and war in Ukraine have thrown multiple spanners into the works.
If the Bank’s predictions don’t come to pass this time, perhaps we should cut them some slack. If they do prove correct, we’ll have much bigger issues to worry about.