Introduction Economic forecasting is a hazardous undertaking. Consider, for example, that the Federal Open Market Committee (Fed) forecasted just over a year ago, that the appropriate Federal Funds Rate would be less than 1 percent at the end of 2022. When the Fed made that rate forecast, it claimed inflation was due to temporary supply disruptions that would self-correct. It gave far less weight to the significant increase in aggregate demand that it had helped create. In June of last year CPI inflation reached a forty year high of 9 percent; however, having raised rates aggressively since then, the Fed is forecasting that inflation will return to its 2 percent target next year, and that while the economy will slow, there will be no recession. This is an attractive forecast, but is it really the most likely?
The Economic Outlook: Four Questions to Consider
The Economic Outlook: Four Questions to…
The Economic Outlook: Four Questions to Consider
Introduction Economic forecasting is a hazardous undertaking. Consider, for example, that the Federal Open Market Committee (Fed) forecasted just over a year ago, that the appropriate Federal Funds Rate would be less than 1 percent at the end of 2022. When the Fed made that rate forecast, it claimed inflation was due to temporary supply disruptions that would self-correct. It gave far less weight to the significant increase in aggregate demand that it had helped create. In June of last year CPI inflation reached a forty year high of 9 percent; however, having raised rates aggressively since then, the Fed is forecasting that inflation will return to its 2 percent target next year, and that while the economy will slow, there will be no recession. This is an attractive forecast, but is it really the most likely?