Cleveland Fed’s Inflation Nowcasting Model Performs Well Compared with Alternatives

New research from the Federal Reserve Bank of Cleveland finds that the Cleveland Fed’s inflation nowcasting model has tended to outperform surveys of professional forecasters, including since the start of the pandemic.  The model’s estimates have historically been more accurate than alternative statistical models for headline inflation, with comparable accuracy for core inflation.

In “A Real-Time Assessment of Inflation Nowcasting at the Cleveland Fed,” researchers Edward S. Knotek II and Saeed Zaman compare the nowcasting accuracy of the inflation estimates coming from the Cleveland Fed model to the accuracy of nowcasts coming from competing sources, which include alternative statistical models and two long-running surveys of professional forecasters.

“While past performance does not guarantee future results, we find that our inflation nowcasting model has performed relatively well,” Knotek and Zaman write.

The Cleveland Fed’s website has been providing daily estimates of both headline and core inflation measures since early 2014 (clevelandfed.org/indicators-and-data/inflation-nowcasting). The model nowcasts US headline and core inflation as measured by the Consumer Price Index (CPI) and the price index for personal consumption expenditures (PCE). This and other inflation-related indicators on the website are provided by the Bank’s Center for Inflation Research to inform policymakers, researchers, and the public about inflation.

Read the Economic Commentary: A Real-Time Assessment of Inflation Nowcasting at the Cleveland Fed

Learn More from the Center for Inflation Research: Center for Inflation Research (clevelandfed.org)

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892