When FOMC members put together their forecasts, they are asked about the risks to their projections.
You would think that the risks to your forecast were symmetric over time. But, as the chart below shows, FOMC members are always much more worried about the risk that the unemployment rate is rising than the risk that the unemployment rate is falling.
This preference for unemployment staying low suggests that policymakers would prefer to cut interest rates too much too quickly to minimize the risk that the unemployment rate will move higher. Which of course increases the risk that inflation starts to move up again.
Note: No survey was conducted in March 2020. Source: Federal Reserve, Apollo Chief Economist
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