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FOMC forecast: is all the information in the central tendency?

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  • William T. Gavin

Abstract

Federal Reserve policymakers began reporting their economic forecasts to Congress in 1979. These forecasts are important because they indicate what the Federal Open Market Committee members think will be the likely consequence of their policies. The Fed reports both the range (high and low) of the individual policymaker’s forecasts and a truncated central tendency. The central tendency range omits outliers from both the top and the bottom of the full range. The author finds, generally, that the forecasts derived from the full range are at least as good as those derived from the central tendency and, in a few cases, significantly better.

Suggested Citation

  • William T. Gavin, 2003. "FOMC forecast: is all the information in the central tendency?," Review, Federal Reserve Bank of St. Louis, issue May, pages 27-46.
  • Handle: RePEc:fip:fedlrv:y:2003:i:may:p:27-46:n:v.85no.3
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    References listed on IDEAS

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    8. Scotese, Carol A., 1994. "Forecast smoothing and the optimal under-utilization of information at the federal reserve," Journal of Macroeconomics, Elsevier, vol. 16(4), pages 653-670.
    9. Joutz, Fred & Stekler, H. O., 2000. "An evaluation of the predictions of the Federal Reserve," International Journal of Forecasting, Elsevier, vol. 16(1), pages 17-38.
    10. Faust, Jon & Rogers, John H & Wright, Jonathan H, 2005. "News and Noise in G-7 GDP Announcements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(3), pages 403-419, June.
    11. Scott Schuh, 2001. "An evaluation of recent macroeconomic forecast errors," New England Economic Review, Federal Reserve Bank of Boston, pages 35-56.
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    Citations

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    Cited by:

    1. Christian Pierdzioch & Jan-Christoph Rülke & Peter Tillmann, 2013. "Using forecasts to uncover the loss function of FOMC members," MAGKS Papers on Economics 201302, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Dopke, Jorg & Fritsche, Ulrich, 2006. "When do forecasters disagree? An assessment of German growth and inflation forecast dispersion," International Journal of Forecasting, Elsevier, vol. 22(1), pages 125-135.
    3. Paul Hubert, 2015. "The Influence and Policy Signalling Role of FOMC Forecasts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 77(5), pages 655-680, October.
    4. A. Jung, 2013. "Policymakers’ Interest Rate Preferences: Recent Evidence for Three Monetary Policy Committees," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 150-197, September.
    5. Tillmann, Peter, 2010. "The Fed's perceived Phillips curve: Evidence from individual FOMC forecasts," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1008-1013, December.
    6. N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2004. "Disagreement about Inflation Expectations," NBER Chapters,in: NBER Macroeconomics Annual 2003, Volume 18, pages 209-270 National Bureau of Economic Research, Inc.
    7. Chanont Banternghansa & Michael W. McCracken, 2009. "Forecast disagreement among FOMC members," Working Papers 2009-059, Federal Reserve Bank of St. Louis.
    8. Rülke, Jan-Christoph & Tillmann, Peter, 2011. "Do FOMC members herd?," Economics Letters, Elsevier, vol. 113(2), pages 176-179.
      • Jan-Christoph Rülke & Peter Tillmann, 2010. "Do FOMC Members Herd?," MAGKS Papers on Economics 201032, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Henning Fischer & Marta García-Bárzana & Peter Tillmann & Peter Winker, 2014. "Evaluating FOMC forecast ranges: an interval data approach," Empirical Economics, Springer, vol. 47(1), pages 365-388, August.
    10. Clark, Todd E. & McCracken, Michael W., 2014. "Evaluating Conditional Forecasts from Vector Autoregressions," Working Paper 1413, Federal Reserve Bank of Cleveland.
    11. Tillmann, Peter, 2011. "Strategic forecasting on the FOMC," European Journal of Political Economy, Elsevier, vol. 27(3), pages 547-553, September.
    12. Carl Bonham & Richard Cohen & Shigeyuki Abe, 2006. "The Rationality and Heterogeneity of Survey Forecasts of the Yen-Dollar Exchange Rate: A Reexamination," Working Papers 200611, University of Hawaii at Manoa, Department of Economics.
    13. Gamber, Edward N. & Liebner, Jeffrey P. & Smith, Julie K., 2015. "The distribution of inflation forecast errors," Journal of Policy Modeling, Elsevier, vol. 37(1), pages 47-64.
    14. William T. Gavin, 2003. "Inflation targeting: why it works and how to make it work better," Working Papers 2003-027, Federal Reserve Bank of St. Louis.

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