“The only function of economic forecasting is to make astrology look respectable.” So said John Kenneth Galbraith, the late, left-wing American economist. His quip seems particularly apt, given the dire recent performance of Britain’s economic forecasters.

We are still suffering from the Bank of England’s inflation forecasting failures. Despite a soaring money supply, huge budget deficits and disrupted global supply chains, in 2021 the Bank predicted that inflation would remain under control at about its 2 per cent target. That proved to be a spectacular error. Inflation peaked at 10.7 percent, leaving the Bank’s forecasts lagging by an average of 3.1 percentage points a year ahead since August 2020, an underestimate of the price level that is nothing short of breathtaking.

Stung by missing this inflation, the Bank, along with its forecasting brethren, then veered into outright pessimism. By the third quarter of 2022, they prophesied inflation surging past 13 per cent, a prolonged 2023 recession and an unemployment rate today of 5 per cent and rising. Wrong again. Modest growth in 2023 defied the doomsday prophecy and unemployment is down at 3.8 per cent. So Ben Bernanke, the former Federal Reserve chairman, has been called in to review the Bank’s forecasting processes “during times of significant uncertainty”.

Naturally, the Bank and other forecasters like this qualifier, reminding us that their modelling is inherently contingent and so vulnerable to unexpected shocks. “It’s tough to make predictions, especially about the future,” as Yogi Berra, the baseball legend, once said. And it’s true: the Ukraine war exacerbated inflation as natural gas prices soared in 2022, just as inflation peaked lower and real GDP growth was higher last year as gas prices fell more quickly than expected.

Yet Putin’s tanks and global gas price volatility cannot account for the magnitude of British forecasting inaccuracies. A Bloomberg analysis recently showed that British forecasters had underperformed compared with their G7 counterparts, despite all facing these same global shocks. In 2023, not once did British inflation align with its forecasting consensus; in fact, inflation strayed outside the full range of economists’ forecasts four times.

The scale of errors points to fundamental flaws in our economic modelling. The Office for Budget Responsibility completely missed excess demand pressures in the economy, for example. From 2020–21 to 2022–23, aggregate spending outstripped the OBR’s forecasts by a massive 8.3 per cent, with the lion’s share driven by private business and household spending. This tidal wave of extra demand, fuelled by generous pandemic monetary and fiscal stimulus, drove inflation much higher than the pandemic or the Ukraine war otherwise would have done.

Not that it’s only domestic forecasters who’ve being calling the British economy wrong. The International Monetary Fund, which last week pontificated that Jeremy Hunt’s March budget should avoid tax cuts, predicted a 2023 recession, as did the Organisation for Economic Co-operation and Development. The IMF, in particular, seems to have a blind spot when it comes to the UK, having underestimated its growth in every year since 2016, barring the anomaly of 2020.

These forecasts aren’t merely academic missteps; they have tangible economic and policy consequences. Investment choices, government budgeting decisions, all pivot on official forecasts’ reliability. On days in 2023 when inflation data was released, there was a more volatile pound as markets self-corrected. Evolving OBR growth forecasts drove a swing in the chancellor’s fiscal rules from a £27 billion annual budget black hole to £31 billion of “headroom” for tax cuts in the build-up to the autumn statement. This is no way to foster responsible budgeting.

The international disparity in accuracy implies that “better models” could help our forecasters. Yet we also should acknowledge that predicting the path of a £2.5 trillion economy underpinned by billions of individual decisions and trades is inherently difficult. A more robust approach to making policy would lean more on economic intuition over elaborate models, tangible data over speculative projections, and budgeting rules less sensitive to such fickle guesstimates.