Market-based forecasting operates on which of the following?

Market-based forecasting relies on current market indicators, including spot and forward rates, to make predictions about future financial conditions. This approach utilizes real-time data from the financial markets, reflecting the collective expectations of all market participants regarding future interest rates and economic conditions. By analyzing these indicators, investors can gauge market sentiment and forecast interest rate movements more accurately.

This method stands in contrast to relying solely on historical price averages, which may not account for current market dynamics or shifts in economic conditions. Additionally, while long-term economic forecasting can provide valuable insights, it often lacks the immediacy and responsiveness that market indicators offer. Thus, market-based forecasting emphasizes the real-time information contained in prices and rates currently observed in the market, making it a dynamic and relevant approach for predicting future trends.