Professional long-run inflation forecasts are flawed – study
Chicago Fed research says projections are bogged down by cognitive distortions and overconfidence
Cognitive distortions and overconfidence are among the issues that plague professional forecasters’ projections of long-run inflation, according to research from the Federal Reserve Bank of Chicago.
“Professional forecasters’ long-run inflation expectations overreact to news and exhibit persistent, predictable biases in forecast errors,” says the working paper.
The authors – Jonas Fisher, Leonardo Melosi and Sebastian Rast – used data from the US Survey of Professional Forecasters. They say their
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