Central banks' macroeconomic forecasts: When two do the same thing, it is not the same thing

What do central bankers base their interest rate decisions on? In this article, we compare the forecasting and analytical tools and processes applied by inflation-targeting central banks when making monetary policy. We draw on a questionnaire prepared by the Czech National Bank and distributed to the relevant units of 22 central banks in developed and developing economies in the second half of 2023. The responses reveal that a wide diversity of detail underlies the apparent similarity in central banks' internal macroeconomic forecasting processes. That diversity manifests in the range of analytical and forecasting tools used and the degree of transparency in the monetary policy process. We also show how the ownership of the forecast varies across banks and how intensively the bank's management is involved in preparing the macroeconomic forecast. Both have implications not only for the structure of the internal discussions inside the central bank, but also for the bank's external communications. We conclude by considering how the Covid and energy crises occurring in rapid succession gave rise to a new challenge for forecasting and for the role of forecasts in the monetary policy process in a context of growing tensions in the global economy. These events, among others, are motivating many central banks to review their monetary policy frameworks and often their modelling frameworks as well.