THE Bank of England has been over-reliant on inadequate forecasts and lacks parliamentary scrutiny, a Lords’ report warns.

The Lords economic affairs committee said it should have its remit “pruned” by the Treasury.

Its report, published today, said public confidence in the central bank nosedived as it seemed unable to produce accurate economic predictions as inflation rocketed over the past two years.

Peers said that while many factors — including the renewed invasion of Ukraine in February 2022 — had contributed to the inflation, “the persistence of above-target inflation over this period also reflects errors in the conduct of monetary policy, including an over-reliance on inadequate forecasting models.”

Interest rates used to be set by the government, but in 1998 the new Labour government decided to hand the power to the bank and make it independent from government interference.

The Lords said that this independence has worked well but that the bank’s remit has expanded without a corresponding increase in oversight from Parliament.

“We are concerned that a democratic deficit has emerged, which risks undermining confidence in the bank and its operational independence,” it said.

“We therefore believe that current parliamentary arrangements should be enhanced. In particular, we recommend that Parliament should conduct an overarching review of the bank’s remit, performance and operations.”

Such a review can be conducted every five years, it said.

The report added: “We recommend that the bank’s remit should be pruned by HM Treasury, with a focus on the number of matters it is expected to have regard to and consider.”

The Bank of England said: “We’d like to thank the committee for this report and will be giving the recommendations careful consideration. We’ll respond formally in due course.”