By James Ashley, Ronnie Driver, Simon Hayes and Christopher Jeffery of the Bank's Conjunctural Assessment and Projections Division.
True values of key macroeconomic variables are unobservable and can only be estimated. A key question for the Monetary Policy Committee is how best to take account of the resultant uncertainty in its economic assessment. Official estimates of economic variables are produced by the Office for National Statistics (ONS), and some private sector organisations publish surveys of business activity that may also give clues as to the underlying state of the economy. This article presents a simple methodology for deriving 'best guesses' of the true values of economic variables by weighting together official estimates and information from business surveys.
Dealing with data uncertainty