John McDermott: The value of forecasting in an uncertain world

Speech by Dr John McDermott, Assistant Governor and Chief Economist of the Reserve Bank of New Zealand, to the New Zealand Manufacturers and Exporters Association (NZMEA), Christchurch, 15 May 2017.

The views expressed in this speech are those of the speaker and not the view of the BIS.

"We are all forecasters." Tetlock and Gardner, Superforecasting.

It has often been said that there is no escaping forecasting. Every decision we make in life involves forming a view about what the future might hold. Likewise, there is no escape for the Bank. We have a Policy Targets Agreement that requires us to keep future inflation between 1 and 3 percent and therefore we need to form a view of where we currently are, how future developments might influence the path of output and inflation, and thus how we should respond.

 We use our forecasting to establish a clear and well-founded plan for what monetary policy settings are necessary to achieve our inflation target, to communicate this plan to the public and to support the effectiveness and transmission of monetary policy. We present our forecasts in the quarterly Monetary Policy Statement. A great deal of effort goes into producing these forecasts.