An evaluation of the inflation forecasting performance of the European Central Bank, the Federal Reserve, and the Bank of England

Abstract

AbstractWe provide an overview of the formulation of the forecasts of the European Central Bank, the Federal Reserve, and the Bank of England. We also provide statistical assessments of the performance of the forecasting process of those central banks. We find that the inflation forecasts have, by‐and‐large, been unbiased and efficient at the very short‐term forecast horizon. The performance deteriorates over longer horizons. This latter finding could be attributable, inter alia, to the approach applied in the integration in the forecasting process of the assumptions on the future market‐implied interest rate path.