Federal Reserve policymakers’ economic projections are useless and possibly misleading when given greater weight than more accurate forecasts by central-bank staff, two scholars say.
“Policy makers certainly talk as if they believe they have useful information to add to the staff’s forecasts,” University of California, Berkeley, economists Christina and David Romer wrote in a paper for a conference Jan. 4. “For the most part, they do not.”
The Romers are on the seven-member business-cycle dating committee of the National Bureau of Economic Research, the Cambridge, Mass., group that charts U.S. expansions and recessions.
The couple’s paper calls into question the usefulness of the Fed’s November decision to boost disclosure of central bankers’ views on inflation, unemployment and growth to four times a year.
The study also raises concern about the relationship between Federal Open Market Committee members’ views and the staff outlook, which may be in conflict.
