It enables us to link policy decisions to our objectives and to the economic outlook, to consider simultaneous shocks and interactions among economic variables systematically and consistently, and to ensure that there is some consistency in interpreting the flow of data between forecast updates and policy decisions.
But even the most advanced models can only be very abstract representations of the economy, and our forecasting model is deliberately designed to be relatively simple and adaptable. Too much complexity would make it difficult to understand the transmission mechanisms and dynamics in the model, and would be unlikely to improve forecasting accuracy materially.