📝Professional Forecasters Overshoot Rates By 50Bps On Avg.: St. Louis Fed

Actual values of real GDP growth were within this range of forecasts less than half the time (46.7%). This may seem like poor performance; but given the wide range of historical observations, this could be quite good. Actual real GDP growth since 1993 has ranged from –2.8% to 5.9%, a range of 8.7 percentage points. The forecast range for real GDP growth has historically been only 1 percentage point and is 1.8 percentage points for 2023. Based on historical performance, it is essentially a coin toss as to whether actual real GDP in 2023 will fall within this relatively narrow range of –0.5% to 1.3%.

Mean forecast error (MFE), indicates whether the consensus forecast is biased—that is, whether it has historically missed in a certain direction. For most indicators, the MFE is near zero, indicating little to no forecast bias toward either overshooting or undershooting. However, the MFE on the 10-year Treasury yield forecast is –0.5%, indicating that forecasters have typically predicted higher interest rates by an average of 50 basis points. This result is in line with the fact that forecasters have consistently missed the long-run downward trend in interest rates since 1993.- St. Louis Fed