Question

Various survey-based measures of inflation expectations are available reflecting consumer, market, and economists" outlooks. For instance, the Survey of Professional Forecasters (SPF) is available from the Philadelphia Federal Reserve at https//www.philadelphiafed.org/research-and-data/ real-time-center/survey-of-professional-forecasters/, while the well-known University of Michigan consumer inflation expectations survey is available at https://fred st1ouisfed org/series/MICH. Compare the most recent readings of inflation expectations of the SPF and Michigan survey to actual CPI inflation. In general, which one seems to be more accurate?

Short answer

Michigan survey appears to be more accurate for the predicted inflation rate than SPF.

Step-by-step solution

Step 1. Concept of Inflation 

Inflation is defined as an increase in the quantity of money while diminishing its value. It is the process of increasing the value of products and services while lowering the value of money. It causes a drop in the purchasing power of a country's GDP.

Step 2. Explanation

The SPF's most recent readings of inflation expectations suggest that inflation is predicted to rise to $3$ percent from $2$ percent last year, whereas the Michigan poll shows that inflation is expected to be $2.7$ percent rather than $3$ percent.

In both cases, the actual inflation rate for the first quarter of $2018$ is $1.8$ percent, which is lower than the predicted inflation rate. However, given to the modest increase in inflation in the first quarter of $2018$, the Michigan survey appears to be more accurate for the predicted inflation rate than SPF.

As a result, the Michigan survey appears to be more accurate.