Fed Forecasting since the Great Recession

Abstract

Federal Open Market Committee (FOMC) decisions rely on economic forecasts from the Federal Reserve Board (FRB) staff. This paper analyzes the forecasts of GDP growth, inflation, and unemployment by the FRB staff and the FOMC from 2009 through 2016. Forecasts for the current year are positively significant but biased predictors of actual values. For future years, forecasts of unemployment are positively significant but biased, while forecasts of GDP growth and inflation are negatively correlated to actual rates or are not statistically significant. FOMC unemployment forecasts are more accurate than the FRB staff's, but differences for inflation and GDP growth are not statistically significant.

Keywords: Federal Reserve, Forecasting, GDP, Inflation, Unemployment

JEL Classification: E37, E47, E58