In this paper, we test the claim that the Federal Reserve (Fed) possesses information advantage over the public. We compare accuracy of forecasts made by the Fed to those made by the public at the individual level. Past evidences show that the Fed forecasts are more accurate than "consensus"' forecasts. However, our results suggest that the Fed is more accurate than only half, but not all, of private-sector forecasters. We further examine the cause of the Fed's relative forecast accuracy. Inside information about future policy does not seem to be the only source of the advantage. The more important explanation is the inefficient use of publicly available information by the private-sector forecasters.

Keywords: Asymmetric Information, Inflation Forecasts, Monetary Policy, Rational Expectations

JEL classification: D82, E37, E52