Five key ways the Bank of England outperformed its peers

(Bloomberg Opinion) — The Sunak government has not been shy about claiming credit for bringing Britain’s inflation rate back to 2% after three years above target, even though the Bank of England However, it has proven to be highly reserved. The pressure is higher than in France, Germany and the United States. Part of this reticence reflects concerns that inflation could rise again by the end of the year.

But cultural aspects are also involved. Although these are at the forefront of central banking practice and some have already been imitated by other central banks, the Bank tends to humbly highlight its achievements. Does it sound strange? That can’t be true. Here are five ways our bank has outperformed its peers over the past few years.

First, it was the first to recognize that it had been wrong to describe the 2021-2022 inflation spike as temporary, and quickly shared publicly its assessment of the causes that led to that mischaracterization.

Second, banks adequately addressed the material risks of financial turmoil during the Liz Truss era while limiting the risk of moral hazard. On that famous Tuesday, when hedge funds stubbornly refused to take over their loss-making overleveraged positions, Governor Andrew Bailey firmly told the funds that the World Bank’s extraordinary financial support was I’ll never forget you reminding me it was ending on Friday. And so it happened, and the money retreated.

Third, rather than displaying false precision, as the Fed has repeatedly done through its dotplots, the bank is being clear about the extraordinary uncertainty facing its policy decisions these days. This message is further reinforced by the publication of the results of the Monetary Policy Committee’s vote, the highest policy-making body, which includes multiple votes by members on both sides of the majority decision.

Fourth, the World Bank did not hesitate to commission an external review of its forecasting models and approaches, even though the forecast errors were not that bad compared to those of other major central banks. The results of this review were presented and discussed at a press conference.

Finally, recognizing the importance of cognitive diversity and its role in combating dangerous groupthink, we are the only major central bank in the developed world to have external appointments to our highest policy-making committee. There is.

Now, don’t get me wrong. I’m not saying the Bank of England is perfect. Although we have stumbled at times in this crazy economic, financial, and political world we live in, our integrity, humility, and willingness to learn from our mistakes set us apart from other companies.

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Mohamed A. El-Erian is a columnist for Bloomberg Opinion. He is the former chief executive of Pimco and president of Queen’s College, Cambridge. Chief economic advisor of Allianz SE. Chairman of Gramercy Fund Management. He is the author of “The Only Game in Town.”

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