by Marc Chandler
Former Fed Chair Bernanke keeps a blog at Brookings. His latest post offers insight on how to think about the Federal Reserve’s and, in particular, Fed officials’ understanding of the US economy.
Bernanke’s beginning point is the long-term forecasts of the Summary of Economic Projections–the last dots in the dot plot. There are three forecasts that are made: GDP, unemployment, and Fed funds. The shorter-term forecasts are an assessment of where the economy is going in the current cycle, while the longer-term forecasts are more about structural relationships.
Bernanke argues that the long-term dot plot for GDP is a judgment about the potential growth. It is not within the control of monetary policy.