Federal Reserve Officials
Don't Trust U.S. Economic Data
The article I chose to blog
about explains how Fed officials and their staff are dismissing large amounts
of the most recent economic data because they view it as ‘unreliable.’ What makes them feel as though this data is
‘unreliable’? Who can/should we trust?
San Francisco Fed’s chief of
research, Glenn Rudebusch, told Reuters,
an international news agency, in
an interview on Friday that they did not trust the most recent economic data
and would no not consider such in future economic statistical predictions. “First-quarter will be weak, but we think
that it is not representative of the underlying strength of the economy.” It is
hard to say whether the Feds can be trusted since dismissing a bunch of potentially
useful data cannot always go over lightly. This is because if the Feds ‘simply’
dismiss a bunch of data, it will cause a hiccup in the data analysis calculations. This could cause an economic turn as it would
be harder for investors, businesses and households to plan for the central
bank’s next interest-rate move (Fortune).
This analysis should give them a pause in relying on the data for key
decisions (NBR). The article mentions
how “That’s a huge problem because it relies on the figures to set interest
rates.” (Fortune).
There
is always a twist in a scenario like this.
The article mentions how disagreement in data interpretation has not
been a recent issue. “The disconnect between what the GDP data says and how Fed
staffers and policymakers read it is not a new problem for the Fed, which has
endured several years of weakness” (Fortune).
Because this so-called ‘disconnection’
has been a repeating occurrence, it shows how difficult is it conclude the
‘right’ decision since the truth is never addressed.
Since
there is uncertainty within the data system, it is hard to say which decision
is best. If we delete data, it will take
away a chunk of entries, but if we keep the data and it ends up being
unreliable, our system will have incorrect data entries. I personally think it would be worst to keep
the data in the system and it be unreliable than to just delete the data at the
beginning to avoid any incorrect entries. It is hard to say what the best decision is,
but I think the Fed’s are worth trusting.
This article emphasizes the
importance of proper data keeping.
Because there is so much data packed into such an amount of memory,
disrupting even a small portion of data can make a big different in analytic
calculations. This article mainly
focuses on how predictions made by statisticians, investors, businesses and
households would be skewed if Fed officials dismiss most recent economic data
just because it is ‘unreliable’. Because this article overlooked this, we will
never know what exactly is making the Fed’s feel as though this data
incorrectly displays the activity of the economy.
Primary Source:
I think this article truly emphasizes the importance of proper data keeping. Because there is so much data packed into such an amount of memory, disrupting even a small portion of data can make a big different in analytic calculations. I also have to agree with sydney on how they mainly focus on how predictions made by statisticians would be skewed if the fed officials dismiss the data.
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