Whose Inflation Expectations Best Predict Inflation?
17 Citations•2021•
Randal J. Verbrugge, Saeed Zaman
Economic Commentary (Federal Reserve Bank of Cleveland)
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Abstract
We examine the predictive relationship between various measures of inflation expectations and future inflation. We find that the expectations of professional economists and of businesses have tended to provide more accurate predictions of future inflation than the expectations of households and of financial market participants. However, the forecasts coming from a relatively simple and popular benchmark inflation forecasting model have historically been roughly as accurate as the expectations of businesses and professional economists.