Participants - which include some of you here - are asked for a forecast of the CPI over a one and two-year horizon. We have eight years of data from about fifteen forecasters which enables us to make some observations about the way accuracy diminishes with horizon. As expected, the mean absolute error of the year-ended forecasts increases quickly out to about a year.
This concern may be higher now than in the past, since total assets under management in bond mutual funds have more than doubled in the past decade to about $ trillion this year. These funds now hold about one-tenth of the corporate bond market, and the redemption behavior of investors in these funds during a market correction is unclear.