Short Description
The St. Louis Fed revisits economists’ past forecasting errors, revealing systematic optimism and what it means for the current U.S. economy outlook into 2026.
Read Time
3 minutes, 15 seconds
Main Article
A new analysis from the Federal Reserve Bank of St. Louis offers a sobering look at the historical performance of professional forecasters. The report, “Revisiting Professional Forecasters’ Past Performance and the Outlook for 2026,” highlights a persistent and critical blind spot: a systematic tendency toward optimism. Historically, forecasts for key variables like GDP growth have consistently overestimated the strength of the U.S. economy, while underestimating the persistence of inflation trends. This recurring pattern suggests that expert predictions are often skewed, missing major turning points like the financial crisis and failing to anticipate the prolonged inflationary pressures that began in 2021.
This historical context is crucial for interpreting today’s economic projections. As the Federal Reserve navigates a complex post-pandemic landscape, understanding these past biases is essential. The current consensus for a “soft landing”—where inflation moderates without a severe recession—must be viewed through this lens of historical over-optimism. The St. Louis Fed’s research implies that risks may be asymmetric, with potential downside surprises to growth and upside surprises to inflation being more likely than baseline forecasts admit. This directly impacts expectations for interest rates and monetary policy.
Looking ahead to the outlook for 2026, the report cautions against taking point forecasts at face value. Instead, it emphasizes the importance of scenario planning and stress testing for businesses and investors. The key takeaway is that while professional forecasters provide a necessary benchmark, their projections should be a starting point for analysis, not a conclusion. Prudent financial planning requires incorporating wider uncertainty bands and learning from the profession’s well-documented historical errors, especially in an environment where inflation trends and geopolitical shocks remain dominant forces shaping the U.S. economy.
Short Summary
The Federal Reserve Bank of St. Louis warns that professional forecasters have a historical bias toward over-optimism, often missing recessions and underestimating inflation. This insight is critical for assessing the current U.S. economy outlook into 2026, urging investors and policymakers to weigh forecasts with healthy skepticism and prepare for wider-than-expected outcomes.
