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Working Paper
Retrospective on the Federal Reserve Board Staff's Inflation Forecast Errors since 2019
This paper examines the Board staff's inflation forecast misses over the years following the COVID-19 outbreak, focusing on a timeline of what staff members knew when and lessons learned along the way. The staff significantly underestimated both the size and persistence of the inflationary surge that followed the reopening of the U.S. economy. As a result, staff members made various changes to their forecasting procedures, including using new types of data to inform their assessment of supply-demand imbalances in product and labor markets and to guide their judgmental forecast. Throughout, an ...
Working Paper
Understanding Survey Based Inflation Expectations
Survey based measures of inflation expectations are not informationally efficient yet carry important information about future inflation. This paper explores the economic significance of informational inefficiencies of survey expectations. A model selection algorithm is applied to the inflation expectations of households and professionals using a large panel of macroeconomic data. The expectations of professionals are best described by different indicators than the expectations of households. A forecast experiment finds that it is difficult to exploit informational inefficiencies to improve ...
Working Paper
Forecasting Inflation: Phillips Curve Effects on Services Price Measures
We estimate an empirical model of inflation that exploits a Phillips curve relationship between a measure of unemployment and a subaggregate measure of inflation (services). We generate an aggregate inflation forecast from forecasts of the goods subcomponent separate from the services subcomponent, and compare the aggregated forecast to the leading time-series univariate and standard Phillips curve forecasting models. Our results indicate notable improvements in forecasting accuracy statistics for models that exploit relationships between services inflation and the unemployment rate. In ...