(Reuters) – Former U.S. Federal Reserve chair Ben Bernanke said on Wednesday he would be “disappointed” if the Bank of England did not debate the possibility of publishing its own projections for the likely path of interest rates.
Bernanke, who authored a review into the BoE’s forecasting and communication procedures, said there were positives and negatives to publishing interest rate projections.
He stopped short of recommending that the BoE adopts rate projections, given the “very consequential” nature of such a move, but he told British lawmakers that he hoped a debate would happen.
“I don’t think it’s a slam dunk, I think it’s definitely something worth looking at,” Bernanke told lawmakers from the British parliament’s Treasury Committee.
“I would be disappointed if the Bank did not seriously review the possibility at some point in the next couple of years.”
Bernanke, who headed the Fed between 2006 and 2014, made public the so-called “dot plot” of interest rate projections made by individual Fed policymakers in 2012.
On the plus side, Bernanke said rate projections were a powerful form of forward guidance for investors.
Adopting them would mean the BoE would no longer need to tie its forecasts to the market pricing for future interest rate moves, which can be a source of confusion in communicating a clear policy message.
But Bernanke said there were practical considerations that were specific to the BoE.
Its relatively large Monetary Policy Committee of nine members, each with an equal vote, might make it harder to form a coherent rate projection than in other central banks that publish projections.
Bernanke cited the central banks of Sweden and Norway, which have smaller policy committees and governors who hold a casting vote over decisions.
He added there were times when central banks might not want to give such powerful forward guidance, at times of uncertainty around the economy or policy.
(Reporting by Andy Bruce and William Schomberg, Editing by Alexandra Hudson)
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