Accuracy in Economic Forecasting Is an Aspiration, Says Fed Chair Warsh

Summary

Federal Reserve Chairman Kevin Warsh says the Fed should not commit to explicit forward guidance or mechanical interest-rate reaction functions because economic knowledge is too imprecise. He argues forecasting accuracy remains an aspiration amid fast-moving geopolitics, supply chains, and technology. Warsh points to 2021 forward guidance as potentially slowing the policy response to high inflation. He says the Fed will work on more reliable models and robust rules while remaining open to a full range of views.

• Kevin Warsh speaks at the Fed's Jackson Hole conference on monetary policy and forecasting.
• He argues against committing to explicit forward guidance or mechanical reaction functions.
• He says economic knowledge is not precise enough to rely on a simple rule like the Taylor rule.
• He cites 2021 forward guidance as potentially slowing the policy response to high inflation.
• He says the Fed will seek more reliable models and robust rules.
• He emphasizes that forecasting accuracy is still only an aspiration.
• He calls for the Fed to receive a full range of economic views.