Fed paper seeks better forecasts from information inefficiencies

Survey measures of inflation expectations tend to deviate from what rationality would imply, but exploiting these inefficiencies to produce forecasts is difficult, according to a working paper published in April by the Federal Reserve.

Travis Berge’s paper, Understanding survey-based inflation expectations, exploits what the author says is a gap in the literature. Work to date has not asked whether the lack of rationality in survey measures is useful for improving forecasts.

Adjusting for the