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Strategic forecasting on the FOMC

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  • Tillmann, Peter

Abstract

The Federal Open Market Committee (FOMC) of the Federal Reserve consists of voting and non-voting members. Apart from deciding about interest rate policy, members individually formulate regular inflation forecasts. This paper uncovers systematic differences in individual inflation forecasts submitted by voting and non-voting members. Based on a data set with individual forecasts recently made available it is shown that non-voters systematically overpredict inflation relative to the consensus forecast if they favor tighter policy and underpredict inflation if they favor looser policy. These findings are consistent with non-voting member following strategic motives in forecasting, i.e. non-voting members use their forecast to influence policy.

Suggested Citation

  • Tillmann, Peter, 2011. "Strategic forecasting on the FOMC," European Journal of Political Economy, Elsevier, vol. 27(3), pages 547-553, September.
  • Handle: RePEc:eee:poleco:v:27:y:2011:i:3:p:547-553
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    More about this item

    Keywords

    Monetary committee Inflation forecast Forecast errors Monetary policy Federal Reserve;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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