Discussion Paper

Making a Statement: How Did Professional Forecasters React to the August 2011 FOMC Statement?


Abstract: The Federal Open Market Committee (FOMC) statement released on August 9, 2011, was the first to incorporate language on “forward guidance” with an explicit date tied to the Committee’s expected path of monetary policy. In this post, we exploit the timing of surveys taken before and after this statement’s release to investigate how professional forecasters changed their expectations of growth, inflation, and monetary policy. We find that the average forecast of the federal funds rate shifts considerably and closely aligns with the new language in the statement, while the average forecasts for growth and inflation change less. While there’s near unanimity among forecasters about the future path of the federal funds rate after the August 2011 FOMC statement, forecasters maintained differing views on the growth and inflation outlooks.

Keywords: Professional Forecasters; FOMC communication; policy expectations;

JEL Classification: E2; E5;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2013-01-07

Number: 20130107