How did the economy surprise us in 1998

There is a oneto two-year delay between when the Federal Reserve changes monetary policy and the resulting effects on real output, unemployment, and in ation, so policymakers must be forward-looking and preemptive in order to effectively stabilize the economy and control in ation (Rudebusch 1995). Macroeconomic forecasts are thus a crucial element for the conduct of monetary policy, and good forecasts help ensure good policy. Accordingly, an important adjunct to the policy process should be an ongoing assessment of the quality of macroeconomic forecasts. This Economic Letter provides a forecast evaluation “case study” by examining the accuracy of the San Francisco Fed’s (FRBSF) FRBSF Economic Letter