The Wall Street Journal (WSJ) has examined and scored on accuracy over 700 predictions made between 2009 and 2012 in speeches and congressional testimony by 14 Fed policymakers. Janet Yellen, the woman the Whitehouse want to be chair of the Federal Reserve, topped their chart.
The newspaper used the following benchmarks: gross domestic product for growth, the unemployment rate, and the change in Commerce Department’s personal consumption expenditure price index for inflation.
Janet Yellen scored 0.52 per cent overall, with a score of 0.64 for inflation and labour, and 0.27 for growth. William Dudley took second place with an overall score of 0.45, 0.63 for inflation, 0.50 for labour and 0.31 for growth. Current Fed chairman Ben Bernanke came fifth, with 0.29 as an overall score, 0.33 for inflation, 0.40 for labour and 0.14 for growth. He was given a second ranking of 10th place to include speeches made that included forward-looking comments made on behalf of the Federal Open Market Committee. Charles Plosser came in last, with an overall score of -0.01.
Each statement, said the WSJ, "was scored on a scale from -1, far from what actually happened, to +1, very accurate." It used standard deviation - a measure of the normal variability in a collection of data - to calibrate the scoring. If a predication was within one standard deviation of what is considered normal variation, it was given one point. If it was more than one standard deviation away, it lost a point. Half a credit was awarded to official who made forecasts that were "in the right direction but, but lacked precision".