Although it was not a totally unpredictable shock, the timing was always uncertain and we still don’t know what the ultimate impact will be.
Lawrence Meyer, a former Federal Reserve Governor, in commenting on the Federal Reserve’s reactions to the financial market turbulence, said that the recent shift in policy stance “tells us how difficult it is to translate financial turbulence into macroeconomic forecast.” A model-based forecast is only as good as the key assumptions that it is based on.