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Does the Cleveland fed's inflation nowcasting model outperform Professional Forecasters?

New research from the Federal Reserve Bank of Cleveland finds that the Cleveland Fed’s inflation nowcasting model has tended to outperform surveys of professional forecasters, including since the start of the pandemic.

What is a 'nowcast' of inflation?

The Federal Reserve Bank of Cleveland provides daily “nowcasts” of inflation for two popular price indexes, the price index for personal consumption expenditures (PCE) and the Consumer Price Index (CPI). These nowcasts give a sense of where inflation is today. Released each business day.

When is the CPI nowcasted?

Case 1 occurs right before the start of the month; Case 2, day 15 of the target month; Case 3, the last day of the target month; and Case 4, day 15 of the following month, at which point the CPI for the month being nowcasted is assumed to be available, and only PCE and core PCE inflation rates remain to be nowcasted.

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