To do this, we produce forecasts, on a regular basis, that indicate our central expectations for the economy – the baseline. In principle, this should be enough to form a view on how policy should be designed today. But we all know that this would be a bad idea.
Policymakers are typically poor forecasters, and central bankers are no exception.2 This is nothing to be ashamed of. It merely testifies to the fact that the past is often a poor predictor of the future. You can see this quite clearly for the euro area on my first slide. We call it the “spaghetti chart”.