Deutsche Bank’s chief U.K. economist, Ciarán Barr, was apparently the only prognosticator in the City to forecast the Bank of England’s surprising rate cut following its February 6 policy meeting. The 30-year-old Irishman was shocked to discover just how lonely his voice was: “If I’d known how isolated we were going to be, I’m not sure I would have gone out on a limb.”
The U.K.'s economy has held up better than its European neighbors’, and the local housing market shows no signs of cooling. That seems to have persuaded 28 of 29 economists polled by Bloomberg to stick with the status quo -- they predicted no reduction in rates. Barr was the exception.
Maybe the others should get out of the City more.
A few days before the central bank meeting, Barr was in Boston interviewing job candidates from Harvard. His London colleague George Buckley phoned early one morning to report that a just-released survey of U.K. purchasing managers indicated that the growth rate for U.K. industry and services was the lowest in a year. Barr issued his forecast from his hotel room at 4:30 a.m. Boston time. “We thought that half a dozen other economists would change their views on a rate cut as well,” he muses.
Barr concedes that he is not unerring. He predicted a rate cut last November, but the BoE didn’t oblige. Still, he says, “That was not so bad, because half the City was with us. You always want to get it right when no one else is forecasting it and get it wrong when there are others in the same situation.”
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