Even the most sophisticated models need to be supplanted by anecdotal and other off-model information.
As Federal Reserve Chairman Ben Bernanke recently remarked, “for all the advances that have been made in modeling and statistical analysis, practical forecasting continues to involve art as well as science.” Our most recent forecast that we reported on in the August MPC statement suggests that we will be outside the target range until the second quarter of next year, and then inflation will gradually decline.