How Good Is Ben Bernanke at Forecasting Economic Conditions?
In many ways, central bankers are like physicians and in some ways, the market is a hypochondriac — but that’s beside the point. Central bankers are constantly trying to diagnose the condition of the economy and prescribe medication for what ails it in times of trouble.
The problem with both medicine and economics is that they are tremendously complex and not completely understood, and making accurate predictions is insanely difficult. Because of this, it’s also hard for an observer to tell the difference between someone who is making accurate predictions and someone who is just getting lucky. Fortunately for us, The Wall Street Journal has analyzed the economic predictions made by U.S. Federal Reserve policymakers between 2009 and 2012 and ranked them based on accuracy.
So how do our central bankers stack up? It may not be too surprising, but Federal Reserve Chairman Ben Bernanke doesn’t even make the top three.
Fed Vice Chair Janet Yellen scores a decisive victory in the WSJ Fed leader board. Bernanke ties for fourth place with Dallas Fed President Richard Fisher.
Bernanke was appointed the 14th chairman of the Federal Reserve by President George W. Bush in February 2006 and was renominated by President Barack Obama for a second term in January 2010. His current term expires in January 2014, and most observers speculate that he will hang up his hat come the new year.
Government involvement in the economic recovery has become the biggest issue facing Obama in his second term. Accommodating monetary policy has defined post-crisis economics, and financial markets have become addicted to federal purchases of bonds and mortgage-backed securities. The future of monetary policy is directly related to — and in many ways dictates — the ongoing narrative of the U.S. economic recovery. Whoever takes the chair after Bernanke will have considerable control over those policies.
So who will take the title of monetary czar from Bernanke when the time comes? Back in May, Bloomberg posted the question to a group of financial and economic decision makers to get the market consensus, and Yellen was the favorite.