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FOMC consensus forecasts

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Author Info

  • William T. Gavin
  • Geetanjali Pande

Abstract

In November 2007, the Federal Open Market Committee (FOMC) announced a change in the way it communicates its view of the economic outlook: It increased the frequency of its forecasts from two to four times per year, and it increased the length of the forecasting horizon from two to three years. The FOMC does not release the individual members' forecasts or standard measures of consensus such as the mean or median. Rather, it continues to release the forecast information as a range of forecasts, both the full range between the high and the low and a central tendency that omits the extreme values. This paper uses individual forecaster data from the Survey of Professional Forecasters (SPF) to mimic the FOMC's method for creating their central tendency. The authors show that the midpoint of the central tendency of the SPF is a reliable measure of the consensus, suggesting that the FOMC reporting method is also a reliable measure of consensus. For the dates when both are available, the authors also compare the relative forecast accuracy of the FOMC and SPF consensus forecasts for output growth and inflation. Overall, the differences in forecast accuracy are too small to be statistically significant.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2008)
Issue (Month): May ()
Pages: 149-164

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Handle: RePEc:fip:fedlrv:y:2008:i:may:p:149-164:n:v.90no.3,pt.1

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Keywords: Federal Open Market Committee ; Monetary policy;

References

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  1. Karamouzis, Nicholas & Lombra, Raymond, 1989. "Federal reserve policymaking: an overview and analysis of the policy process," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 30(1), pages 7-62, January.
  2. Lombra, Raymond & Moran, Michael, 1980. "Policy advice and policymaking at the federal reserve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 13(1), pages 9-68, January.
  3. David Reifschneider & Peter Tulip, 2007. "Gauging the uncertainty of the economic outlook from historical forecasting errors," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2007-60, Board of Governors of the Federal Reserve System (U.S.).
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  5. Jansen, Dennis W. & Kishan, Ruby Pandey, 1996. "An evaluation of federal reserve forecasting," Journal of Macroeconomics, Elsevier, Elsevier, vol. 18(1), pages 89-109.
  6. Gavin, William T. & Mandal, Rachel J., 2003. "Evaluating FOMC forecasts," International Journal of Forecasting, Elsevier, Elsevier, vol. 19(4), pages 655-667.
  7. Ben S. Bernanke, 2007. "Federal Reserve communications," Speech, Board of Governors of the Federal Reserve System (U.S.) 344, Board of Governors of the Federal Reserve System (U.S.).
  8. William T. Gavin & Rachel J. Mandal, 2000. "Forecasting inflation and growth: do private forecasts match those of policymakers?," Working Papers, Federal Reserve Bank of St. Louis 2000-026, Federal Reserve Bank of St. Louis.
  9. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, American Economic Association, vol. 90(3), pages 429-457, June.
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  11. Kevin Dowd, 2004. "FOMC Forecasts of Macroeconomic Risks," Occasional Papers, Industrial Economics Division 12, Industrial Economics Division, revised 10 Jan 2004.
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Cited by:
  1. Peter Tillmann, 2010. "Strategic Forecasting on the FOMC," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201017, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Peter Tillmann, 2009. "The Fed’s perceived Phillips curve: Evidence from individual FOMC forecasts," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 200946, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  3. Henning Fischer & Marta García-Bárzana & Peter Tillmann & Peter Winker, 2014. "Evaluating FOMC forecast ranges: an interval data approach," Empirical Economics, Springer, Springer, vol. 47(1), pages 365-388, August.
  4. Christian Pierdzioch & Jan-Christoph Rülke & Peter Tillmann, 2013. "Using forecasts to uncover the loss function of FOMC members," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201302, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. Chanont Banternghansa & Michael W. McCracken, 2009. "Forecast disagreement among FOMC members," Working Papers, Federal Reserve Bank of St. Louis 2009-059, Federal Reserve Bank of St. Louis.
  6. Paul Hubert, 2013. "The influence and policy signaling role of FOMC forecasts," Documents de Travail de l'OFCE, Observatoire Francais des Conjonctures Economiques (OFCE) 2013-03, Observatoire Francais des Conjonctures Economiques (OFCE).

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