Balance of Risks Statement

Balance of Risks Statement

A statement the Federal Open Market Committee issues after each meeting indicating members' thoughts on potential, future policy decisions. The risks to which the name refers are the risk of inflation (combated with higher interest rates) versus the risk of recession (combated with lower interest rates). The balance of risks statement gives analysts some insight into what the FOMC is thinking. The FOMC began issuing balance of risks statements in 2000.
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Nevertheless, as was the case with the earlier language--the balance of risks statement has tended to be interpreted as indicating likely future policy moves.
The effectiveness of the balance of risks statement and its interpretation by the public has been the subject of some controversy.
The minutes of that meeting report that "the members anticipated that a neutral balance of risks statement could be appropriate before long, probably well before substantial evidence had emerged that economic growth had strengthened appreciably, once the Committee could see that policy had eased enough to promote a future return to maximum sustainable economic growth.
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