The Future of Illusions or the Illusions of the Future: FOMC Economic Projections 2008-2015

Abstract

Monetary policy is forward looking and, in its pursuit of transparency, it communicates its economic outlook to the public at large. As a result, there is great interest in the FOMC's projections and its determinants. Indeed, do these projections converge to the actual values and at what pace? To what extent predictions for a given year are determined jointly with predictions for other years? To what extent FOMC participants differ in their outlook? Are their differences related to the state of the economy? To the Chair of the FOMC? What information is being used for revising these projections and is it possible to anticipate what the FOMC will anticipate? Is it possible to extract a narrative about the functioning of the economy? And is that narrative consistent with existing theories? To address these questions, we assemble FOMC forecasts from 2008 to 2015, examine their statistical properties, and assess the extent to which these forecasts can be predicted using publicly available data at the time the forecasts are made.