Wringing the Overoptimism from FOMC Growth Forecasts

Lansing, Kevin J.; Yee, Winnie

Journal Article

Wringing the Overoptimism from FOMC Growth Forecasts

Abstract: Growth forecasts by Federal Open Market Committee meeting participants were persistently too optimistic for 2008 through 2016. The typical forecast started out high but was revised down over time, often dramatically, as incoming data failed to meet expectations. In contrast, forecasts for 2017 through 2019 started low but were revised up over time. Cumulative forecast revisions for these years were much smaller on average than in the past. These observations suggest that participants have adjusted their forecast methodology, including lowering estimates of trend growth, to eliminate the prior optimistic bias.

Keywords: Summary of Economic Projections; Federal Open Market Committee; GDP growth;