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FOMC consensus forecasts

Author

Listed:
  • William T. Gavin
  • Geetanjali Pande

Abstract

In November 2007, the Federal Open Market Committee (FOMC) announced a change in the way it communicates its view of the economic outlook: It increased the frequency of its forecasts from two to four times per year, and it increased the length of the forecasting horizon from two to three years. The FOMC does not release the individual members' forecasts or standard measures of consensus such as the mean or median. Rather, it continues to release the forecast information as a range of forecasts, both the full range between the high and the low and a central tendency that omits the extreme values. This paper uses individual forecaster data from the Survey of Professional Forecasters (SPF) to mimic the FOMC's method for creating their central tendency. The authors show that the midpoint of the central tendency of the SPF is a reliable measure of the consensus, suggesting that the FOMC reporting method is also a reliable measure of consensus. For the dates when both are available, the authors also compare the relative forecast accuracy of the FOMC and SPF consensus forecasts for output growth and inflation. Overall, the differences in forecast accuracy are too small to be statistically significant.

Suggested Citation

  • William T. Gavin & Geetanjali Pande, 2008. "FOMC consensus forecasts," Review, Federal Reserve Bank of St. Louis, vol. 90(May), pages 149-164.
    • Handle: RePEc:fip:fedlrv:y:2008:i:may:p:149-164:n:v.90no.3,pt.1
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    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. 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.
    3. 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.
    4. Chanont Banternghansa & Michael W. McCracken, 2009. "Forecast disagreement among FOMC members," Working Papers 2009-059, Federal Reserve Bank of St. Louis.
    5. Rülke, Jan-Christoph & Tillmann, Peter, 2011. "Do FOMC members herd?," Economics Letters, Elsevier, vol. 113(2), pages 176-179.
    6. 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.
    7. Jones, Adam T. & Ogden, Richard E., 2017. "A day late and a dollar short: The effect of policy uncertainty on fed forecast errors," Economic Analysis and Policy, Elsevier, vol. 54(C), pages 112-122.
    8. Yoichi Tsuchiya, 2021. "The value added of the Bank of Japan's range forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(5), pages 817-833, August.
    9. Tillmann, Peter, 2011. "Strategic forecasting on the FOMC," European Journal of Political Economy, Elsevier, vol. 27(3), pages 547-553, September.
    10. 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.
    11. Tae-Hwy Lee & Yiyao Wang, 2019. "Evaluation of the Survey of Professional Forecasters in the Greenbook’s Loss Function," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(2), pages 345-360, June.
    12. 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.
    13. Stefan Eichler & Tom Lähner, 2014. "Forecast dispersion, dissenting votes, and monetary policy preferences of FOMC members: the role of individual career characteristics and political aspects," Public Choice, Springer, vol. 160(3), pages 429-453, September.

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