The paper, written while they were both working in the New York Fed's Research Group in the mid-1990s, formed the basis of many internal discussions in 1999-2000 and 2006-2007 as the U.S. yield curve inverted.11 Much of the internal discussion was around trying to understand whether the properties of the yield curve were different. The current estimate from this model is a 23.6 percent chance that the U.S. economy will be in an NBER-defined recession in January 2020. Just like Tetlock, Arturo liked to extremize the results of the model, so for example a probability of at or above 30 percent is moved to 100 percent and below 30 percent is moved to zero. One reason to extremize the results is that the prediction object is a recession in one particular month, rather than the probability of a recession over a period of time. Marcelle Chauvet and I analyzed this more general problem.12 Our goal was to avoid the problem with the probit model that a constant forecast of, for example, a 25 percent probability that the economy will be in 3/6  BIS central bankers' speeches  recession in 12 months' time implying after one year of such monthly predictions a 97 percent probability the economy would be in a recession in at least one month of the 12. This is similar to the issue I mentioned earlier, where some of the superforecasters appear to have had difficulty calibrating their probability assessments over varying time horizons.
I expect the unemployment rate to edge down to slightly below 3.5 percent next year, the lowest level in nearly 50 years. In keeping with this strong economic outlook, I expect price inflation to move up a bit above 2 percent. Importantly, I don’t see any signs of greater inflationary pressures on the horizon. This is all very good news, especially in the context of the slow recovery and low inflation that has persisted in the years since the financial crisis. In light of the progress we’ve made on our monetary policy goals, the FOMC has been in the process of gradually normalizing monetary policy for the past few years. Looking forward, I continue to expect that further gradual increases in interest rates will best foster a sustained economic expansion and achievement of our dual mandate goals. Since first raising rates from near-zero back in December 2015, the FOMC has continued to 1/4  BIS central bankers' speeches  raise the target range for the federal funds rate as the economy has improved and moved toward our maximum employment and 2 percent longer-run inflation objective. Our most recent rate increase came in late September, when the FOMC set the target range between 2 and 2.25 percent.2 Throughout, we’ve repeatedly stressed that we foresaw this to be a process of gradual normalization, reflecting the balancing of risks to reaching our goals.