Hubris, economic forecasting, and the road to ruin
The next time economists declare that they can project the economy’s performance far into the future, remember that the Federal Reserve recently failed to project even a current-year inflation rate within three percentage points.
Specifically, the Federal Open Market Committee (FOMC) forecasted in December 2020 that inflation (as measured by the PCE, the Fed’s preferred measure) would be 1.8 percent in 2021. The Fed hiked the current-year estimate during the course of 2021, but never above 4.2 percent. PCE inflation ended up at 5.8 percent for the year.
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Brian M. Riedl is a senior fellow at the Manhattan Institute. Follow him on Twitter here.
This piece originally appeared in National Review Online