Both simple feedback policies and forecast-based policies influence how policymakers think about their decisions, as I have just noted. However, in my judgment, reliance on these two approaches is not symmetric; instead, the forecast-based approach has become increasingly dominant in the monetary policymaking of leading central banks.
This dominance is reflected in the resources that central banks devote to data collection and modeling and in the increasing sophistication and detail of central bank forecasts.9 Indeed, a number of central banks with explicit inflation objectives publish regular forecasts and closely link monetary policy decisions to those forecasts.10 The Federal Reserve does not explicitly link policy actions to forecasts, but projections of how the economy is likely to perform under different policy plans are nevertheless central to the monetary policy process in the United States; that is, the Federal Reserve relies primarily on the forecast-based approach for making policy.