Chart 3 shows some detail on recent behavior of the forecasts for core PCE inflation from the SPF and dispersion in long-run CPI inflation forecasts. The first panel shows the average of point forecasts since 2007 for the current year and year-ahead core PCE inflation rate. As one would expect, the current year forecast is more variable, and for the most part the yearahead forecast remains above the current year forecast after the financial crisis, consistent with the pull of anchored inflation expectations. However, both sets of forecasts are still below what some have called, based on the Summary of Economic Projections, the mandate consistent range of Federal Open Market Committee participants. 2  BIS central bankers’ speeches  The second panel of Chart 3 shows a measure of uncertainty for these forecasts. Here we can see that uncertainty increased as the financial crisis took hold but has returned to 2007 levels recently. The third panel shows that disagreement across forecasters also increased with the financial crisis and has not returned to pre-crisis levels. Much of this disagreement appears to be related to differing views on the strength of standard Phillips curve dynamics versus other approaches to inflation dynamics. The final panel shows the disagreement in 10-year average CPI forecasts over the last 20 years. As you are aware, one of the great successes of the Federal Reserve in the 1980s and 1990s was a reduction in long-run inflation expectations.
In formulating a question on wage expectations we needed to pose a hypothetical situation to gain information of direct relevance to inflation. It is easiest to illustrate this by giving you the format and exact wording of the question: We first asked individuals who reported to be working for pay how many jobs they had. We then informed them that in some subsequent questions we would ask about their MAIN job, which we defined to be the job at which they usually work the most hours. We then ask: “Suppose that, 12 months from now, you actually are working in the exact same [MAIN] job at the same place you currently work, and working the exact same number of hours. Twelve months from now, do you expect your earnings on this job, before taxes and deductions, to have gone up, or gone down, or stayed where they are now?” For those who said gone up or gone down we then asked: “By about what percent do you expect that your hourly earnings on this job, before taxes and other deductions, will have gone [UP/DOWN], 12 months from now, if you actually are working in the exact same job at the same place you currently work, and working the exact same number of hours?” As in the rest of our work we also elicited uncertainty around this wage expectation. Chart 8 shows a time series of the median response and inter-quartile range to the point prediction question along with the average uncertainty as defined above.