Bank of England: Economic Forecast

Lord Bilimoria Excerpts

Wednesday 6th October 2010 Lords Chamber

[Lord Sassoon]

My Lords, for the avoidance of doubt, the “he” that the noble Lord refers to was the Governor speaking at the TUC conference, not me. There is a considerable question about the path to recovery, but what is noticeable about the Bank of England’s August inflation report is that it clearly states that there is a reduced downside risk to future growth as a result of the fiscal measures taken in the Budget that have reduced the chances of a sharp rise in long-term interest rates. That is one of the findings of the Bank of England that underpin confidence in the steady growth path on which this economy is now set.

[Lord Bilimoria]

My Lords, does the Minister agree that the general view is that the Bank of England’s economic forecasts are too optimistic? In August 2008, when the recession officially started, it said that growth would stay flat, but we achieved a 6.6 per cent decline. Today, it says that growth is going to be over 3 per cent when the OBR and the CBI are closer to 2 per cent. We hear that the Bank of England has new super economic forecasting computers. Does the Minister think that by the economists changing their crystal balls, the leopards are going to change their spots?

[Lord Sassoon]

My Lords, forecasting is not an exact science, which is why, among other things, the Treasury looks at a wide range of forecasts. Indeed, the Treasury publishes regularly the whole range of forecasts that are out in the market. The Bank of England, to its credit, annually reviews its own record in forecasting. The noble Lord may look, if he has not done so already, at a detailed analysis, which is in the August inflation report, of exactly how well the Bank of England’s previous record of forecasting has gone.