The Fed's Amazing Self-Fulfilling Forecast

The Federal Reserve’s track record of economic forecasting is a lot better than many observers recognize. It might also offer some insight into the central bank’s approach to managing the recovery.

Criticism of the Fed’s forecasting has focused largely on its failure to recognize, as late as mid-2008, the depth and persistence of the recession that the global financial crisis would engender. I agree that this error -- which the Fed was not alone in making -- should lead economists at the central bank and elsewhere to do a better job of including financial markets in their forecasting models.