the economy works its way through this current soft spot. with this action, the committee believes thata€¦the risks are balanced with respect to the prospects for both goals [ sustainable economic growth and price stability ] in the foreseeable future. thus, barring further adverse shocks, the fomc perceived the economy as passing through a " soft spot " at present and viewed the current stance of policy as adequate to foster the economic recovery. let me assure you, though, that the federal reserve remains vigilant and stands ready, as always, to implement any changes in the stance of policy deemed necessary to ensure progress toward achieving its twin goals of sustainable economic growth and price stability.

that inflation is low and likely to remain so over the next couple of years. this includes both structural ( dsge ) and statistical ( var ) models of inflation. these attribute the outcomes over the past year or more, in part, to the influence of foreign “ factors ” – as captured by low inflation and low interest rates in the advanced economies. these can have a direct effect on inflation in australia via the prices of imports. there are indirect effects as well, whereby spare capacity in product and labour markets globally may have contributed to relatively low inflation and wage outcomes in australia. the models suggest that these influences on australian inflation are typically quite persistent, which reinforces the message from other sources that inflation is likely to remain low for some time. to be clear, if an initial forecast of a particular number had been close but less than say 2¼ per cent, for example, it would have been rounded down to 2 per cent, but a minor upward revision of less than ½ percentage point could mean it subsequently rounds up to 2½ per cent. j bishop, t gill and d lancaster ( 2013 ), “ gdp revisions : measurement and implications ”, rba bulletin ( march ), pp. 11 – 22, discuss the pattern and size of revisions to real gdp over recent years. lowe p ( 2010 ), “ forecasting in an uncertain world ”, address to the australian business economists annual forecasting conference, sydney, 8 december, describes the inputs into the forecast process in greater detail. bis central bankers ’ speeches uncertainties for several years we have presented confidence intervals for gdp growth and inflation forecasts in the statement ( graph 2 ). 9 these summarise the extent of uncertainty based on previous forecast errors. since february of last year, we have also published an unemployment rate forecast and confidence intervals around that. in addition to confidence intervals, the forecasting process leads us to think about the risks associated with specific economic developments and to quantify those where possible. each quarter, we discuss a range of scenarios that explore how the economy might respond under conditions that vary from the central case. for example, what if commodity prices, the exchange rate or overseas economic conditions evolve differently to the paths embedded in our central forecasts? these exercises help us to identify events that could have a meaningful effect on the economy and to which policymakers may need to respond. background to the pagan - wilcox review we commissioned adrian pagan and david wilcox to conduct a review of forecasting in economic group in late 2014.