https://sputnikglobe.com/20231108/fed-chair-to-central-banks-economists-think-outside-the-models-with-forecasts-1114826576.html
Fed Chair to Central Bank’s Economists: ‘Think Outside the Models’ With Forecasts
Fed Chair to Central Bank’s Economists: ‘Think Outside the Models’ With Forecasts
Sputnik International
Speaking to the Federal Reserve’s Board of Governors on Wednesday, Fed Chair Jerome Powell urged the economists not to make predictions about the future of the US economy based on past economic patterns.
2023-11-08T20:27+0000
2023-11-08T20:27+0000
2023-11-08T20:26+0000
central bank
jerome powell
inflation
economic recession
us
economy
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Speaking to the Federal Reserve’s Board of Governors on Wednesday, Fed Chair Jerome Powell urged the economists not to make predictions about the future of the US economy based on past economic patterns, claiming the US was in essentially new economic territory after the COVID-19 pandemic.“Regular forecasting also demands a systematic approach and a high degree of intellectual rigor,” Powell said, urging that this “has to be combined with flexibility and agility.”“But our economy is flexible and dynamic, and subject at times to unpredictable shocks, such as a global financial crisis or a pandemic,” he continued. “At those times, forecasters have to think outside the models.”At its most recent meeting last week, the central bank’s Federal Open Market Committee (FOMC) decided to leave interest rates at the same record-high level they have been at for four months, despite a creeping rise in inflation.Ever since the Fed began hiking interest rates in response to record-high inflation in early 2022, economists, bankers, and investors alike have been anticipating a recession and a rise in unemployment - phenomena that have yet to manifest themselves, despite being common effects of raising interest rates. Even Powell long doubted the Fed could manage a “soft landing.” While the Fed remained optimistic in the short term, its predictions for the year 2024 and 2025 were similarly dim.Still, the number of new jobs created each month has continued to decrease and the number of unemployed persons has continued to slowly increase, and investors remain mostly unconvinced by the Fed’s rosier predictions as of late, with the infamous “inverted yield curve” continuing to signal that a recession is expected.
https://sputnikglobe.com/20231011/meeting-notes-reveal-us-federal-reserve-sees-one-or-more-rate-hikes-as-necessary-1114114563.html
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jerome powell; recession; federal reserve; economists
jerome powell; recession; federal reserve; economists
Fed Chair to Central Bank’s Economists: ‘Think Outside the Models’ With Forecasts
The Federal Reserve previously decided to leave current US interest rates unchanged as the economy appeared to be growing at a strong pace. The move marked a recent first as it saw the central bank leave rates untouched in back-to-back meetings.
Speaking to the Federal Reserve’s Board of Governors on Wednesday, Fed Chair Jerome Powell urged the economists not to make predictions about the future of the US economy based on past economic patterns, claiming the US was in essentially new economic territory after the COVID-19 pandemic.
“Regular forecasting also demands a systematic approach and a high degree of intellectual rigor,”
Powell said, urging that this “has to be combined with flexibility and agility.”
“Economic models can do a reasonably good job of capturing the working of the economy over past decades,” Powell said. “Of course, even with state-of-the-art models and even in relatively calm times, the economy frequently surprises us.”
“But our economy is flexible and dynamic, and subject at times to unpredictable shocks, such as a global financial crisis or a pandemic,” he continued. “At those times, forecasters have to think outside the models.”
At its most recent meeting last week, the central bank’s Federal Open Market Committee (FOMC)
decided to leave interest rates at the same record-high level they have been at for four months, despite a creeping rise in inflation.
11 October 2023, 19:55 GMT
While Powell acknowledged at the time that the Fed’s high interest rates were exerting a “downward pressure on economic activity” that had yet to be fully felt, he also noted that “recent indicators suggest that economic activity has been expanding at a strong pace, and well above earlier expectations.”
Ever since the Fed began hiking interest rates in response to record-high inflation in early 2022, economists, bankers, and investors alike have been
anticipating a recession and a rise in unemployment - phenomena that have yet to manifest themselves, despite being common effects of raising interest rates. Even Powell long doubted the Fed could manage a
“soft landing.” While the Fed remained optimistic in the short term, its predictions for the year 2024 and 2025 were similarly dim.
However, by the time of its July meeting - the last time the Fed raised interest rates - its prediction of a recession by the end of the year had been removed.
Still, the number of new jobs created each month has
continued to decrease and the number of unemployed persons has continued to slowly increase, and investors remain mostly unconvinced by the Fed’s rosier predictions as of late, with the infamous
“inverted yield curve” continuing to signal that a recession is expected.
