FYI: The Fed’s Survey of Professional Forecasters for 2017 Q2 shows that 10-year rates are expected to rise to 2.9% over the coming 12 months. The problem is that Wall Street economists have been consistently too optimistic for the past 15 years, see chart below. To correct for the excessive optimism among forecasters, one can subtract the average forecast error, i.e. the average mistake made for the past 15 years by the forecasting community, which is 0.6%-points. Doing that gives a 12-month forecast for 10-year rates of 2.3%.
Regards,
Ted
http://ritholtz.com/2017/06/excess-optimism/
Comments
Indeed, the data demonstrate that economists are an optimistic band. The chart not only illustrates that optimism, but also shows that they are very asymmetric in their forecasts. Over the many forecasts provided in the chart, the economists never projected a meaningful downturn. From their view, the economy is forever expanding. I wish it were so!
The article does not identify what is included in their 10 year projection. That would be a useful input.
Best Wishes