A PR Banana Skin For The Bank Of England

A banana skin lurks around the corner, with its eyes on clumsy Bank of England officials.

(You don’t have to be clumsy to work at the Bank, as the old joke nearly goes, but it helps.)

On Friday former Fed chairman Ben Bernanke will reveal the results of his review into why the Bank got its inflation forecasts wrong following Russia’s invasion of Ukraine.

First of all, fair play to the Bank for admitting its failings, getting someone serious to have a look, and making his findings public.

What will he say? Well, we’ll see, but it seems most likely he is going to find some problem with Bank processes and how it digests the massive amount of data at its disposal.

The biggest problem though, will be a PR issue.

As CNBC puts it: “Economists believe Bernanke will focus on how the Bank communicatesuncertainty around its central forecasts during external shocks.”

It can’t talk straight, in other words, and from that is where all the confusion flows.

The most important Bank communications come from Governor Andrew Bailey, a smart, nice, dedicated man with a tendency to open his mouth, insert his foot, and chew.

Bailey has a few PR clangers to his name, the worst of which was surely asking the rest of us to reject pay rises while handing one to staff of 4%.

The banana skin is that Bernanke explains at length why the Bank was too slow to raise interest rates, just as it ponders whether to cut them.

Until this week, the sure betting was on cuts soon, perhaps two or three this year.

Today we had the US markets slashing rate cut prospects after inflation came in 3.5%, well ahead of the 2% target.

If UK inflation does what we expect – goes to 2% in May or even lower – then there is no reason for the Bank Monetary Policy Committee not to ignore America and cut rates as (almost) promised.

Unless the Bank is wrong again and that fall in inflation is a blip and it moves too quickly for fear of being accused of moving too slowly again.

In theory, Bank rate decisions are set by rational, clever people who have all eyes on data and none on their own public perception.

In reality, they are also just people who don’t like having the stuffing kicked out of them in the press.

I’m glad I’m not Andrew Bailey. In a couple of weeks time, he may wish he wasn’t.