The Bank of England’s (BoE) chief economist, Andrew Haldane, has admitted the central bank’s forecast that the Brexit vote would cause a sharp slowdown in the UK economy had proved to be a misjudgment.
He added that misjudged forecasting had failed to anticipate the global financial crisis of 2008 and had left the economic profession “in crisis”.
Haldane told UK daily The Guardian that the BoE had not anticipated the resilience of UK consumer spending following the June 23 referendum on European Union (EU) membership and criticised the Bank’s economic forecasting models.
“I am not someone who would say that all that has been done in the past is terrible. It is just that the models we had were rather narrow and fragile,” he added. “The problem came when the world was tipped upside down and those models were ill-equipped to making sense of behaviours that were deeply irrational.”
The BoE was criticised for its role in so-called ‘Project Fear’ in the run-up to the EU referendum, supporting the warnings by the-then prime minister David Cameron and chancellor George Osborne that the UK would suffer a dramatic economic slowdown if voters elected to leave the EU.
However, Haldane believes that Brexit could still harm growth: “I think, near-term, the data – the evidence we have been accumulating since the referendum – has surprised to the upside. There has been greater resilience, in particular among consumers and among the housing market, than we had expected.
“Has that led us to fundamentally change our view on the fortunes of the economy looking forward over the next several years? Not really.”
Haldane also suggested that following a series of inaccurate forecasts, economists would now be re-examining their models: “It is a fair cop to say the profession is to some degree in crisis. It is not the first time it has happened. Out of this crisis, there could be a rebirth of economics.”
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