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4. The Survey of Professional Forecasters regularly asks a set of forecasters for quantitative forecasts of key economic variables, including economic growth rates and inflation
4. The Survey of Professional Forecasters regularly asks a set of forecasters for quantitative forecasts of key economic variables, including economic growth rates and inflation rates. In the third quarter of 2020, the median forecast for the one-year inflation rate was 1.77% and the median forecast for the 10-year inflation rate was 2.03%. As of early October, 2020, the interest rates associated with one-year US government bonds are around 15 basis points (0.15%) and interest rates associated with 10-year US government bonds are approximately 70 basis points. Use the Fisher equation to compute estimates of the real interest rate at one-year and 10-year horizons. Briefly discuss what the results imply for the real return on savings that bond investors are willing to accept. 4. The Survey of Professional Forecasters regularly asks a set of forecasters for quantitative forecasts of key economic variables, including economic growth rates and inflation rates. In the third quarter of 2020, the median forecast for the one-year inflation rate was 1.77% and the median forecast for the 10-year inflation rate was 2.03%. As of early October, 2020, the interest rates associated with one-year US government bonds are around 15 basis points (0.15%) and interest rates associated with 10-year US government bonds are approximately 70 basis points. Use the Fisher equation to compute estimates of the real interest rate at one-year and 10-year horizons. Briefly discuss what the results imply for the real return on savings that bond investors are willing to accept
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