Incoming Bank of England deputy governor rejects calls to scrap OBR

It came days after Former Prime Minister Liz Truss said she wants to “see the back” of the fiscal watchdog.

The Bank of England in the City of London
The Bank of England in the City of London (Yui Mok/PA)

The incoming deputy governor of the Bank of England has rejected calls for the UK’s fiscal watchdog to be scrapped and stressed there is “widespread support” for the central bank.

However, Clare Lombardelli, who will join the Bank in July, said she hopes for a shake-up over forecasting at the Bank of England after criticisms in last week’s Bernanke review.

Ms Lombardelli, who will take over from Ben Broadbent, made the comments amid questions from Parliament’s Treasury Select Committee.

It came days after former prime minister Liz Truss said Bank of England governor Andrew Bailey should resign over his response to the 2022 mini budget which triggered market turmoil, and said she wants to “see the back” of the OBR (Office for Budget Responsibility) watchdog.

Ms Lombardelli told MPs on the committee she believes there is “widespread support” for the structure of the Bank of England and the Governor.

She also provided her backing to the OBR, the Government’s official forecaster, describing herself as a “big fan” of the institution, having seen its economic assessments while working in the Treasury.

“It’s very valuable to have that independent expert judgment on fiscal policy,” she added.

The session also came less than a week after a report by former US Federal Reserve chair Ben Bernanke found that models that the Bank of England uses to make economic forecasts had “significant shortcomings”.

Mr Bernanke also found that Bank staff were using “out-of-date” software which had not been properly maintained.

Ms Lombardelli stressed that here will be “a shake-up in response” to the findings in the report.

The deputy governor was also asked about when interest rates – which reman at 15-year high of 5.25% – will next be reduced.

“I’m not going to put a date on when I expect the UK to start to process of loosening monetary policy but is clearly the direction of travel, certainly for European economies,” she said.