The FOMC's balance-of-risks statement and market expectations of policy actions
In January 2000, the Federal Open Market Committee (FOMC) instituted the practice of issuing a “balance of risks” statement along with their policy decision immediately following each FOMC meeting. Robert H. Rasche and Daniel L. Thornton evaluate the use of the balance-of-risks statement and the market’s interpretation of it. They find that the balance-of-risks statement is one of the factors that market participants use to determine the likelihood that the FOMC will adjust its target for the federal funds rate at their next meeting. Moreover, they find that, on some occasions, the FOMC behaved in such a way as to encourage the use of the balance-of-risks statement for this purpose. The clarifying statements that sometimes accompany these balance-of-risks statements, as well as general remarks made by the Chairman and other FOMC members, often provide additional useful information.
Volume (Year): (2002)
Issue (Month): Sep ()
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- Daniel Thornton & David C. Wheelock, 2000. "A history of the asymmetric policy directive," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 1-16.
- William Poole & Robert Rasche, 2000.
"Perfecting the Market's Knowledge of Monetary Policy,"
Journal of Financial Services Research,
Springer, vol. 18(2), pages 255-298, December.
- William Poole & Robert H. Rasche, 2000. "Perfecting the market's knowledge of monetary policy," Working Papers 2000-010, Federal Reserve Bank of St. Louis.
- Alan S. Blinder, 1999. "Central Banking in Theory and Practice," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522608, June.
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