Forecast error is essentially zero compared to the end of last year.
figure 1: Annual increase in CPI inflation (black), median expectations from the Professional Forecasters Survey (blue +), median expectations from the Michigan Consumer Survey (red), median expectations from the New York Fed Consumer Expectations Survey (light green), Cleveland's projected Fed (pink), all expressed as percentages. NBER-defined recession peak-to-trough dates appear gray. Source: BLS, University of Michigan, via FRED, Philadelphia Fed Survey of Professional Forecasters, Fed, Federal Reserve Bank of Cleveland and the National Bureau of Economic Research.
Who overestimated inflation a year ago?
figure 2: Forecast errors, all in percent, from Survey of Professional Forecasters (blue+), Survey of Michigan Consumers (red), New York Fed Survey of Consumer Expectations (light green), Cleveland Fed (pink) express. NBER-defined recession peak-to-trough dates appear gray.Source: BLS, University of Michigan, via FRED and Investment Network, Philadelphia Fed Survey of Professional Forecasters, Fed, Federal Reserve Bank of Cleveland NBER, and author's calculations.
Although inflation figures for 2021-22 measured by the SPF and the Cleveland Fed were lower than expected, they were largely on track as of November/December. In contrast, household indicators overestimate inflation.
