Examining the Performance of FOMC Inflation Forecasts

Abdelrahman, Hamza; Lansing, Kevin J.; Oliveira, Luiz E.

Journal Article

Examining the Performance of FOMC Inflation Forecasts

Abstract: Calendar-year inflation forecasts from Federal Open Market Committee meeting participants typically start near 2% and then are revised in response to incoming data. Before the pandemic when actual inflation was mostly below 2%, participants consistently lowered their forecasts over time. From 2021 onward when inflation surged to 40-year highs, participants consistently raised their forecasts over time. In both periods, cumulative forecast revisions help predict the size of subsequent forecast errors. This implies that the typical inflation forecast was slow to adjust to new information that could have improved forecast accuracy.

Keywords: FOMC; inflation; forecasts; inflation forecasts;