Forecasts of inflation affect decision-making in many segments of the economy. But in the early 1980s, economists found that forecasts in surveys taken over the past 20 years systematically underpredicted inflation. As a result, many economists stopped paying attention to forecasts. However, they may have abandoned them too quickly. In this article, Dean Croushore takes a closer look at survey forecasts and, after considering some relevant factors, concludes that inflation forecasts may not be as bad as you think.
Copyright © 1996 Federal Reserve Bank of Philadelphia. This article first appeared in Business Review - Federal Reserve Bank of Philadelphia 3 (May/June 1996): 15-25.
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Croushore, Dean. "Inflation Forecasts: How Good Are They?" Business Review - Federal Reserve Bank of Philadelphia 3 (May/June 1996): 15-25.