Economists Forecasts Tend to be To Optimismic

From Torsten Sløk, Ph.D.:

The Fed’s Survey of Professional Forecasters for 2017 Q2 shows that 10-year rates are expected to rise to 2.9% over the coming 12 months. The problem is that Wall Street economists have been consistently too optimistic for the past 15 years, see chart below. To correct for the excessive optimism among forecasters, one can subtract the average forecast error, i.e. the average mistake made for the past 15 years by the forecasting community, which is 0.6%-points. Doing that gives a 12-month forecast for 10-year rates of 2.3%.


Source: Torsten Sløk, Ph.D., Deutsche Bank