There Is No Crystal Ball

Four combination column/marker charts showing projected and actual economic metrics. Chart subtitle: Under normal economic conditions, the Fed is fairly accurate at predicting economic metrics, except the number of rate hikes. General description: Charts are arranged 2x2, with upper row showing GDP (blue) and Inflation (purple) and lower row showing Unemployment (tan) and No. 25bp Rate Hikes (green). Legends are shown at left of each chart, with projections displayed as lighter columns and actual numbers in darker circle marker overlaid by year. X-axis of each chart shows years from 2014 through 2021. GDP chart description: Y-axis spans -7% to +7%, hovering between 2-3% for the years shown. Generally the Fed projections historically were only off by less than 0.5% until 2020, with a projection of -6.5% and actual at -3.4% and 2021, with a projection of 6.5% and actual at 5.7%. Inflation chart description: Y-axis spans 0% to 6%, hovering between 1% and 2% for the years shown. Generally projections historically were only off by less than 0.2% until 2021, with a projection 2.2% and actual at 4.85%. Unemployment chart description: Y-axis spans 0 to 10%, hovering between 3% and 6% for the years shown, though it had steadily declined since 2014. Generally projections historically were off by only 0.1% until 2020, with a projection of 9.3% and actual at 6.8. 2021 was back to historical norms with a projection of 4.5% and actual at 4.2%. No. 25bps Rate Hiks chart description: Y-axis space -5 to +5. These projections and actual data are very inconsistent; the Fed was only correct one year out of the years shown (2017) and otherwise both under- and overestimates relatively frequently. Chart source: Federal Reserve Summary of Economic Projections, Bloomberg. End chart description.

Posted on February 2, 2022February 2, 2022 Full size 1433 × 775

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Published inThere Is No Crystal Ball

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