The Bank of England is unlikely to predict the next financial crisis, according to one of the central bank’s leading policymakers, who said economic models were unable to provide flawless forecasts for the UK economy.

Monetary policy committee member Gertjan Vlieghe said it was impossible for the Bank to forecast a recession, let alone the next crash, and no amount of fine-tuning models of the way the modern economy operates would change that harsh reality.

Appearing before MPs, Vlieghe warned it was inevitable there would be forecasting errors, which could include missing a cataclysmic event such as the 2008 banking crisis.

He said: “We are probably not going to forecast the next financial crisis, or forecast the next recession. Our models are just not that good.”

The Bank should continue trying to improve and refine its forecasting models, he said, but it was misguided for MPs to demand that economic forecasts offer a high degree of certainty about events that could happen several years from now.

Vlieghe, a former City economist, was answering criticisms from MPs on the Treasury select committee over a series of forecasting errors in the run-up to the Brexit vote.

Like the Treasury, the International Monetary Fund and the Organisation for Economic Cooperation and Development (OECD), Threadneedle Street predicted a sharp slowdown in the event of a vote to leave the EU.

Official figures have shown that, far from slowing, the UK became one of the best-performing economies in the developed world and the fastest growing in the G7 in the second half of 2016.

The Bank of England was told by MPs it should be more circumspect about forecasts, rather than presenting them as ‘holy writ’. Photograph: Graham Turner/The Guardian

Governor Mark Carney said actions by the Bank itself, which cut interest rates weeks after the Brexit vote, and Chancellor Philip Hammond, who lifted constraints on public spending in November’s autumn statement, had helped to boost the economy in the wake of the Brexit vote.



Carney admitted the MPC had misjudged the resilience of consumer spending following a wobble after the referendum, but it could not include in its forecasts actions that policymakers might take to offset weaker confidence among consumers and businesses.

MP Jacob Rees-Mogg suggested the Bank should be more circumspect about its forecasts, rather than presenting them as “holy writ”, and then revising them six months later.

Andy Haldane, the Bank of England’s chief economist, said fan charts showed the probability of the future path of growth and inflation and in most cases the predictions were within a narrow range of the central forecast.

However, he conceded that the economics industry and the Bank found it difficult to convey a sense of uncertainty to the wider world. He said: “We know that people find risk hard to understand; I find risk hard to understand.”