Downside risk
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1.
The risk of an adverse result, for example following an unfavourable change in market prices, or weakness in the economy.
- The economic impacts of Covid-19 to date
- "... risk management considerations favour a relatively prompt and aggressive response to downside risks.
- The costs of policy error are, to an extent, asymmetric at present.
- It is safer to err on the side of easing somewhat too much, and then if necessary tighten as capacity pressures eventually build, rather than ease too little and find the economy gets stuck in a low inflation rut with increased hysteresis costs."
- Michael Saunders, External Member of the Bank of England's Monetary Policy Committee (MPC), May 2020.
2.
The risk that a security or other investment will fall in price, or the amount of loss that could result from that potential fall.
