Measuring Inflation Forecast Uncertainty
Edward Knotek, Saeed Zaman and Todd Clark
Cleveland Fed, 2015-03 | 3.20.2015
Looking across a range of statistical models, we consider the likely path of future inflation and the uncertainty surrounding the models’ predictions. The models suggest that inflation is on a rising path, and while inflation forecast uncertainty is somewhat elevated relative to the norms of the last 20 years, core inflation uncertainty is relatively low. For both inflation rates, forecast uncertainty is much lower as of the first quarter of 2015 than it was around the Great Recession.