Federal Reserve’s Goolsbee calls for improved economic projections and central bank independence

Chicago Fed President Austan Goolsbee wants the Federal Reserve to sharpen its forecasting tools and, while he’s at it, would like everyone to remember who the Fed actually works for. Spoiler: it’s not the president, and it’s not the markets. Speaking at an Official Monetary and Financial Institutions Forum event in London on September 21, Goolsbee laid out a case for overhauling the Summary of Economic Projections, the Fed’s quarterly exercise where policymakers publish their individual forecasts for growth, unemployment, inflation, and interest rates. The SEP, often called the “dot plot” for its visualization of rate expectations, has long drawn criticism for being more confusing than clarifying. The SEP problem Each FOMC participant submits their own projections independently, with no requirement that the assumptions underlying those forecasts be consistent. One governor might be pricing in aggressive tariff escalation while another assumes trade tensions cool off. The result is a scatterplot of dots that markets obsess over but that may not actually represent any coherent policy path. Supply shocks as the new normal The core of Goolsbee’s argument is that large supply shocks ha...