Wringing The Overoptimism From FOMC Growth Forecasts

Figure 4

SEP central tendency midpoint forecasts: 2017 to 2019

(Click on image to enlarge)

Notes: S&P 500 change is the 12-month percent change. Dots mark the SEP forecast release dates; X marks the BEA’s first reported Q4/Q4 real GDP growth rate for the year, typically released in January of the following year.

Source: Federal Open Market Committee Minutes, S&P 500.


A quip often attributed to baseball legend Yogi Berra states, “It’s tough to make predictions, especially about the future." Our review of the SEP real GDP growth forecasts confirms the inherent difficulty of making accurate predictions about future economic activity. The good news is that the persistent overoptimism observed in the SEP growth forecasts for 2008 through 2016 was eliminated in the forecasts for 2017 through 2019. The not-so-good news is that the improved forecast performance appears to reflect an acknowledgment by SEP participants that the U.S. economy’s trend growth rate is now lower than in the years before the Great Recession.


Dudley, William C. 2014. “The Economic Outlook and Implications for Monetary Policy," Remarks before the New York Association for Business Economics, New York City (May 20).

Fernald, John, Robert Hall, James Stock, and Mark W. Watson. 2017. “The Disappointing Recovery of Output after 2009." Brookings Papers on Economic Activity, Spring, pp. 1 - 54.

Lansing, Kevin J., and Benjamin Pyle. 2015. “Persistent Overoptimism about Economic Growth" FRBSF Economic Letter 2015-03 (February 2).

Loungani, Prakash. 2001. “How Accurate are Private Sector Forecasts? Cross-Country Evidence from Consensus Forecasts of Output Growth." International Journal of Forecasting 17(3), pp. 419 - 432.

Potter, Simon 2011. “The Failure to Forecast the Great Recession." Liberty Street Economics (blog), FRB New York (November 25).

U.S. Financial Crisis Inquiry Commission. 2011. “Final Report on the Causes of the Financial and Economic Crisis in the United States." Pursuant to Public Law 111-21 (January).


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