Bulletin n. 2/2011 | ||
October 2011 | ||
Tillmann Peter |
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Strategic forecasting on the FOMC | ||
in European Journal of Political Economy , Volume 27, Issue 3, September 2011 , 2011 , Pages 547-553 | ||
The Federal Open Market Committee (FOMC) of the Federal Reserve consists of voting and non-voting members. Apart from deciding about interest rate policy, members individually formulate regular inflation forecasts. This paper uncovers systematic differences in individual inflation forecasts submitted by voting and non-voting members. Based on a data set with individual forecasts recently made available it is shown that non-voters systematically overpredict inflation relative to the consensus forecast if they favor tighter policy and underpredict inflation if they favor looser policy. These findings are consistent with non-voting member following strategic motives in forecasting, i.e. non-voting members use their forecast to influence policy. | ||