Federal Reserve: Good Data is Hard to Find

Fed officials frequently describe their monetary policy decisions as data dependent. As the central bank has navigated the recovery from the COVID-19 pandemic, a common refrain in its policy statements is that the Federal Open Market Committee (FOMC) will "carefully assess incoming data, the evolving outlook, and the balance of risks" when considering further adjustments. "We are looking at the data to guide us in what we should do," Fed Chair Jerome Powell said at the press conference following the FOMC's meeting at the end of January. The demand for data in economics as a whole has only grown in recent decades. A 2017 article in the American Economic Review found that the profession has become increasingly empirical since 1980, relying more on data analysis over theoretical models. This "empirical turn," as some economists have called it, has been facilitated by computerization, which has both increased the supply of data and aided in its analysis. At the same time, challenges around data quality and timeliness have emerged. How does the Fed ensure it's getting the best information to guide monetary policy?