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The Fed: Fed’s errant estimates of inflation, interest rates show folly of long-term forecasts

Everett Collection
The Federal Reserve is finding it difficult if not impossible to predict the future path of a key U.S. interest rate that determines the cost of borrowing for businesses and consumers.

Predicting the future is a tough business. Just look at the Federal Reserve’s repeated errors in estimating inflation or the level of a key interest rate that influences U.S. borrowing costs.

Just seven months ago, central bank honchos were penciling in two increases in the Fed’s benchmark interest rate in 2019 and another one in 2020. The so-called fed funds rate was supposed to top out at around 3.1%.

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