# The Fed’s forecasts make forward guidance less useful

Markdown copy of https://realalpha.app/s/the-feds-forecasts-make-forward-guidance-less-useful/ on Real Alpha, the best minutes from long interviews with the people building AI. Cite and link the page, not this copy.

- Speaker: [Benn Steil](https://realalpha.app/people/benn-steil/) · Benn Steil is a Director of International Economics at the Council on Foreign Relations. · Wrote award-winning histories of Bretton Woods and the Marshall Plan, and leads CFR’s Geo-Graphics economics blog.
- Host: [Steve Eisman](https://realalpha.app/people/steve-eisman/)
- Show: The Real Eisman Playbook
- Episode: [Inflation, The Deficit & Why the Dollar Stays King with Benn Steil | The Real Eisman Playbook Ep 81](https://realalpha.app/v/ZR5-znz_WcM/), Oct 26, 2026
- Moment: 5:24 to 8:55 of the episode (4 min), playing on https://realalpha.app/s/the-feds-forecasts-make-forward-guidance-less-useful/; the episode from there: https://realalpha.app/v/ZR5-znz_WcM/?t=324

## Quote

> “the Fed has been **systematically worse** than so-called blue-chip private sector forecasters for many, many decades now”
> — [Benn Steil](https://realalpha.app/people/benn-steil/) at [6:58](https://realalpha.app/v/ZR5-znz_WcM/?t=418) · The Real Eisman Playbook

## Takeaways

1. Fed forecasts have historically lagged private-sector forecasts.
2. Forward guidance assumes the Fed knows more about the future than it does.
3. Policy should respond to incoming inflation data.

## About this segment

Benn Steil argues the Fed is a poor forecaster, so promises about future policy can mislead or tie officials’ hands. Eisman adds that data should drive rate decisions, not constant speeches.

From “Inflation, The Deficit & Why the Dollar Stays King with Benn Steil | The Real Eisman Playbook Ep 81”, Oct 26, 2026. [Watch the full episode](https://realalpha.app/v/ZR5-znz_WcM/)

## Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

[5:27](https://realalpha.app/v/ZR5-znz_WcM/?t=327) As an economist, what do you think about his philosophy about quantitative easing and lack of forward guidance? Broadly speaking, I'm not a big fan of his philosophy. Which part? Well, the conservative portfolio of constantly questioning the Fed's balance sheet and what distortions that could have on the economy, all the evidence we have right now is that the Fed is perfectly capable of controlling interest rates when we're well above the zero bound with, quote-unquote, interest on reserves.

[6:06](https://realalpha.app/v/ZR5-znz_WcM/?t=366) the interest that the Fed pays the banks to park money at the Fed. And the fact that the balance sheet is much, much bigger than it was before, say, the great financial crisis, is in no way a problem for the Fed in controlling inflation. Having said that, the one part of his agenda I do agree with is getting rid of, quote-unquote, formal forward guidance. Okay. Elaborate on that. Why? Okay. A number of reasons.

[6:40](https://realalpha.app/v/ZR5-znz_WcM/?t=400) First, the empirical evidence is absolutely overwhelming that the Fed is not good at predicting the future. By the way, nobody is. Thank you. This is a very fair point. I will say that by myself. I am not very good at predicting the future. Neither are you. I go out on a limb and say, neither are you. Neither am I. But the Fed has been systematically worse than so-called blue-chip private sector forecasters for many, many decades now, according to the findings of Fed studies. So, when people say that the Fed should provide forward guidance, they should tell us what they're planning to do in the future, that assumes that the Fed has good information about what the future will be, and therefore they are helping us by telling us what they will do.

[7:37](https://realalpha.app/v/ZR5-znz_WcM/?t=457) But if their information is not better than what we have, and in fact their forecasting abilities are worse, you can imagine all sorts of problems arising from Fed officials telling us that I expect to vote for X or I expect— I see what you're saying. Because they lock themselves in. They lock themselves in. I see what you're saying. They don't want to be— My attitude about all this is this shouldn't be this complicated.

[8:03](https://realalpha.app/v/ZR5-znz_WcM/?t=483) If the inflation data is bad, they'll raise rates. And if the inflation data gets better, they won't. And so pontificating about it all the time is kind of a waste of time. My personal opinion is that FOMC members love the rock star status. They do. They love to get on TV and talk about what they want. They love to speak at institutions like mine, for example, where they get a big, educated audience who hang on their every word.

[8:33](https://realalpha.app/v/ZR5-znz_WcM/?t=513) And particularly when the Fed chairman is being quiet, their views are elevated. So they're very happy with this moment. Very easy to get on the front pages of The Wall Street Journal these days. All right, let's move on. We've got so much to cover. Let's talk about Scott Bessent.