# Reserve Bank forecasting errors

By 80eight Team — 24 June 2025

Canonical: https://80eight.io/blog/reserve-bank-forecasting-errors

The chart below from Codera shows the Reserve Bank over-estimated headline and core inflation before the COVID-19 pandemic and under-estimated inflation in the period that followed.

## Core versus headline inflation

**Core inflation** measures price changes in the economy, but excludes volatile items like food and energy.**Headline inflation** measures price changes in all items, including food and energy.

*Chart: Reserve Bank Inflation Forecasting Errors (Source: Codera)*

## Forecasting has always been hard

We’ve long noted the difficulties in forecasting and how Treasury has often wildly over-estimated GDP growth in calculating expected tax receipts. No-one expects the Reserve Bank to hit it dead on the nail every time, but we wonder why – since 2020 – it has under-estimated inflation while doing the opposite in the years before 2020.

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