BoE forum advances policy modelling toolkit
The Bank of England hosted its second Macro Modelling for Monetary Policy Forum in Leeds on 1 April 2026. External experts discussed five Macro Technical Papers, emphasizing models as complementary tools for policy analysis.
New frameworks for forecasts and global shocks
The Bank of England's second Macro Modelling for Monetary Policy Forum in Leeds highlighted new analytical tools, emphasizing models as complementary devices for policy analysis.
MTP No. 6 detailed an enhanced forecast evaluation framework, now integrated into the Bank's processes.
This framework systematically learns from past forecast errors, particularly those from the 2022–23 energy crisis, by combining statistical tests with economic models to identify error sources like conditioning assumptions or model shortcomings.
Discussants praised its technical quality and open-source code.
A forthcoming global-to-UK structural vector autoregression (SVAR) model was also introduced.
This framework disentangles global demand, supply, energy, US monetary policy, and financial shocks to interpret international forces on the UK economy, aiding in understanding global spillovers and contextualising inflation and growth outcomes.
This work underscores the significant role of external drivers in UK macroeconomic fluctuations.
Household heterogeneity and policy paths
The forum also highlighted MTP No. 7, a UK-HANK model that incorporates household heterogeneity, housing, and balance-sheet channels.
This framework enhances understanding of monetary policy transmission and is valuable for scenario analysis, especially concerning housing markets and financial conditions.
MTP No. 4 presented tools for endogenous monetary policy analysis, generating optimal policy projections and rules-based paths.
These tools, now integrated into MPRs, clarify policy trade-offs and illustrate outcome differences under alternative strategies.
Lastly, MTP No. 5 offered a conceptual framework for monetary policy making under uncertainty.
It guides policy setting based on the nature of economic uncertainties, promoting robust deliberation through diverse analytical perspectives.
Models: Tools for thought, not truth
The forum underscores the Bank's commitment to evolving its analytical toolkit, moving beyond simplistic model reliance.
By fostering external debate and integrating diverse modelling approaches, it strengthens the robustness and transparency of monetary policy formulation.
However, the emphasis on human judgment and complementary tools highlights the inherent limitations of models in complex, uncertain economic environments.