Mishkin says forecasts are central to rate policy

Federal Reserve governor-designate Frederic Mishkin said in a letter to a lawmaker released on Friday 28 July that interest-rate policy must be based on economic forecasts and adjust as new data comes in.

"Monetary policy influences the economy and inflation with long lags, and consequently monetary policy must be made on the basis of forecasts," Mishkin said in a letter to Republican Sen. Jim Bunning of Kentucky.

"Such forecasts are always subject to considerable error," Mishkin cautioned. "Co