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What Is “Outlook-at-Risk?”

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Abstract

The Federal Open Market Committee (FOMC) has increased the target range for the federal funds rate by 4.50 percentage points since March 16, 2022. In tightening the stance of monetary policy, the FOMC balances the risk of inflation remaining persistently high if the economy continues to run “hot” against the risk of unemployment rising as the economy cools. In this post, we review a quantitative approach to measuring the evolution of risks to real GDP growth, the unemployment rate, and inflation that is inspired by our previous work on “Vulnerable Growth.” We find that, in February, downside risks to real GDP growth and upside risks to unemployment moderated slightly, and upside risks to inflation continued to decline.

Suggested Citation

  • Nina Boyarchenko & Richard K. Crump & Leonardo Elias & Ignacio Lopez Gaffney, 2023. "What Is “Outlook-at-Risk?”," Liberty Street Economics 20230215, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:95660
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    File URL: https://libertystreeteconomics.newyorkfed.org/2023/02/what-is-outlook-at-risk/
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    Keywords

    risks to the economic outlook;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • G1 - Financial Economics - - General Financial Markets

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