Board of Governors of the Federal Reserve System

Note: This figure presents the root-mean-squared forecast error from various inflation forecasts. The “Swap” bar presents the forecast error derived from inflation swaps after adjusting for indexation lag. The “FRB TS Model” and “FinNK” bars present forecast errors after adjusting the swap-based forecast for inflation risk premiums derived from the FRB staff term structure model and from the methodology in Mertens and Zhang (2023), respectively. The “SPF” bar, “Blue Chip” bar and the “Consensus” bar present the forecast performance of inflation forecast from the Survey of Professional Forecasters, the Blue Chip survey and the Consensus Economics survey, respectively. The “Random Walk” bar presents the forecast performance of a random walk forecast that equals the last observed one-year inflation rate on each date.

Source: Bloomberg, Blue Chip Financial Forecasts, Consensus Economics, Survey of Professional Forecasters, FRB staff calculations

Note: This figure present the root-mean-squared forecast error from various inflation forecasts. The “Swap” bar presents the forecast error derived from inflation swaps after adjusting for indexation lag. The “FRB TS Model” and “FinNK” bars present forecast errors after adjusting the swap-based forecast for inflation risk premiums derived from the staff term structure model and from the methodology in Mertens and Zhang (2023), respectively. The “Blue Chip” bar and the “Consensus” bar present the forecast performance of inflation forecast from the Blue Chip survey and the Consensus Economics survey, respectively. The “BOE” bar presents the forecast performance of the inflation forecast from the Bank of England based on market expectations of their policy rate. The “Random Walk” bar presents the forecast performance of a random walk forecast that equals the last observed one-year inflation rate on each date.

Source: Bloomberg, Blue Chip Financial Forecasts, Consensus Economics, Bank of England, FRB staff calculations

Note: These figures present the time series of the swap-based inflation forecast, the Blue Chip inflation forecast, and the realized CPI inflation. The realized inflation line is shifted by 1-year to line up with the date the forecasts were made. The inflation swap-based forecast is corrected for indexation lag and plotted with a 1-quarter lag to reflect the appropriate reference horizon. The left panel presents time series for the euro area, and the right panel presents time series for the United Kingdom.

Source: Haver Analytics, Bloomberg, Blue Chip Financial Forecasts, FRB staff calculations