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QuestionHow does the Bank make its assessments and projections of economic activity and prices?


The Bank presents its view on the economic and financial situation in the public statement released after each Monetary Policy Meeting (MPM).

In addition, the Bank releases the Outlook for Economic Activity and Prices (Outlook Report) four times a year (usually in January, April, July, and October). The Outlook Report assesses the current situation of economic activity and prices as well as upside and downside risks, presents the Bank's outlook, and outlines the Bank's thinking on the future conduct of monetary policy. The report also provides (1) the forecasts of the majority of the Policy Board members for real GDP and the consumer price index (CPI, all items less fresh food) as well as (2) each member's forecasts and risk balance assessments for real GDP and the CPI (all items less fresh food).

Assessment of Economic Activity and Prices from Two Perspectives

The Bank conducts monetary policy, based on its assessment of economic activity and prices from two perspectives, in the context of the "price stability target."

The first perspective, with regard to economic activity and prices over the next two years or so, examines whether the outlook deemed most likely by the Bank follows a path of sustainable growth under price stability.

The second perspective examines, over a longer term, various risks that are most relevant to the conduct of monetary policy aimed at achieving sustainable growth under price stability. In particular, financial imbalances are examined as a risk that will significantly impact economic activity and prices if they materialize, although the probability of their emergence is low.

In light of deliberations from the two perspectives described above, the Bank outlines its current view on monetary policy, which is disclosed periodically, mainly in the Outlook Report.

For more details, see The "Price Stability Target" under the Framework for the Conduct of Monetary Policy released on January 22, 2013.

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