Economic Forecasts and Monetary Policy

Economic forecasts are essential tools for monetary policymakers. But behind the numbers of any given forecast, demand- or supply-side factors could be at play, each requiring very different policy responses. For this reason, explains Sandra Pianalto, the president and chief executive officer of the Federal Reserve Bank of Cleveland, in her role as a policymaker it is as important to think about why an economic forecast calls for the economy to head toward a certain point as it is to know what that forecasted point is. These remarks were originally presented to the Cleveland Association for Business Economics on February 13, 2006.