Balance of Risks Statement

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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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The balance-of-risks statement attempted to provide insight into the major policy concerns of FOMC members over the "foreseeable future.
Over the 49 FOMC meetings since February 2000, there have been 10 substantive changes in the wording of the balance-of-risks statement.
The record since 2000 suggests that the balance-of-risks statement and more recently the forward-looking language included in the press releases have provided consistent signals about the direction of future policy actions.
When it was adopted, the language of the balance-of-risks statement was intended to be more general than the previous statements of policy bias, to avoid giving the impression that the statements directly signaled impending changes in the funds rate target.
The FOMC's Balance-of-Risks Statement and Market Expectations of Policy Actions.
The replacement balance-of-risks statement focuses on providing insight into the Committee's assessment of the outlook for future real growth and inflation, but fails short of providing a full fledged forecast of the economy.
To the extent that it reveals the Committee's sensitivity to short-run objectives of policy, the balance-of-risks statement is beneficial in this regard.
The balance-of-risks statement can be misinterpreted because of the prevailing view that employment and inflation necessarily rise and fall together.
Thornton "The FOMC's Balance-of-Risks Statement and Market Expectations of Policy Actions," Federal Reserve Bank of St.
The balance-of-risks statement was intended to indicate the Committee's assessment of the balance of risks for heightened inflation pressures or economic weakness over the foreseeable future.
The purpose of this article is to review the FOMC's use of its balance-of-risks statement and the market's interpretation of it.
Consequently, in announcing its new procedure on January 19, 2000, the FOMC emphasized that the balance-of-risks statement was not intended to convey information about future policy actions.