Ben Bernanke was the main speaker at Milton Friedman’s 90th birthday celebration dinner. He was also Governor of the Fed through the Great Financial Crisis.

When he was appointed to review the Bank of England’s somewhat controversial forecasting performance in recent years, I welcomed the choice as someone who understood monetarism but also government bureaucracy and who was probably the best choice for recommending improvements to a somewhat substandard organisation that had a chance of being implemented.

His report was released this morning.

There are twelve recommendations of which four are especially significant. He has missed some important points but the biggest risk is that his important recommendations are ignored.

The report reads like a classic officialdom exercise in how to subvert an inquiry. The second and third paragraphs describe whom he has taken views from. These include all the usual suspects – Bank staff and former staff (including working lunches with junior staff), the OBR, NIESR, unnamed journalists and for some reason the TUC who do not actually produce forecasts (though the CBI who were not consulted have done so since I produced their first forecasting model in 1975).

The most vociferous critics of the Bank’s forecasting like Tim Congdon and me (let alone others such as Julian Jessop, Patrick Minford or Roger Bootle) have been ignored.

Much of the report concerns process (again a classic officialdom trick so that they can say that they implemented the bulk of the recommendations even if they ignore the substantive ones).

But fortunately, Bernanke still manages to come up with four key proposals contained in his recommendations 3 and 4.

These are as follows. First, the forecasting model should be replaced or “at a minimum substantially revamped”. Second, the new model should contain “rich and institutionally realistic representations of the monetary transmission mechanism, allowing for alternative channels of transmission”. Third, the new model should contain an “empirically based modelling of inflation expectations”. Finally, the new model should contain “detailed models of the financial sector, the housing sector, the energy sector, and other key components of the UK economy” with “greater attention to, and ongoing review of, supply-side elements and their role in the determination of inflation and growth”.

If implemented, these reforms could certainly improve the Bank’s forecasting. However, it is worth noting that most studies of forecasting conclude that it is not the models but the forecasters who really determine the outcome. One of Bernanke’s interesting recommendations is that forecasters should be left much longer and even promoted in post rather than being moved around and hence losing their subject expertise. He also suggests that the Bank’s huge expenditure on research be better targeted to help with its job of monetary policy (possibly a side swipe at the Bank’s seemingly misplaced focus on climate change).

Bernanke was not asked to provide and did not volunteer advice on the composition of the Monetary Policy Committee. Surely this was an error. This Committee seems to have been appointed to meet political objectives such as diversity of ethnic background or gender but has entirely missed the type of diversity which is most important to economic decision-making: diversity of opinion. Monetarism is an important strand of economic opinion and yet there has never been a monetarist appointed to the monetary policy committee. And few economists with strong empirical knowledge have ever been appointed to it either.

Moreover, the nature of the Committee in effect means that it is mainly comprised of academics. Even 20 years ago, a former permanent secretary of the Treasury described the MPC to me as “a bit like the fifth pressing of the grapes” (admittedly at a drinks party in its latter stages but in vino veritas in more than one sense).

Ultimately the Bank of England’s policy making failures – taking far too long to raise interest rates and letting inflation get out of control – reflect problems with the Monetary Policy Committee, not the forecasting models. Without reforming this to remove what I have described as the three banes of good forecasting  – groupthink, arrogance and politicised (generally left-wing) ideology – even improved forecasting models are unlikely to lead to better policy results.

Douglas McWilliams is Deputy Chairman of Cebr, the economics consultancy