Accessible Material
January 2011 Tealbook B Tables and Charts†
Monetary Policy Strategies
Equilibrium Real Federal Funds Rate
Figure: Short-Run Estimates with Confidence Intervals
Line chart, by percent, 1990 to 2011. There are five series, "The actual real funds rate based on lagged core inflation", "Tealbook-consistent measure (FRB/US)", "Range of four model-based estimates", "70 Percent confidence interval", and "90 Percent confidence interval". The actual real funds rate series starts at about 4.5 in 1990, decreases to about 0 by 1992, generally increases to about 4.8 by 2000, generally decreases to about -1 by 2004, generally increases to about 3 by 2007, generally decreases to about -2 by late 2008 and generally increases to about -0.7 by 2011:Q1. Tealbook-consistent measure starts at about 4 in 1997. It generally increases to about 5.5 by 2000, generally decreases to about 0 by 2003, generally increases to about 3 by 2007, decreases to about -4 by 2009, and generally increases to about -1.5 by 2011:Q1. The other 3 series closely track each other throughout the chart, with the 70 percent confidence interval being about 1 percent both lesser and greater than the Range of model-based estimates, and the 90 Percent confidence interval being about 2 percent both lesser and greater than the Range of model-based estimates at any given point. The Range of model-based estimates begins at a range of about [1.5, 4] in 1990, decreases to about [-1.3, 2] by 1991, generally increases to about [2, 4.5] by 2000, generally decreases to about [-0.5, 1.5] by 2003, increases to about [0.5, 2.25] by 2006, decreases to about [-7, -1.3] by 2009 and then increases to about [-2, 0.3] by 2011.
| Current Tealbook | Current Quarter Estimate as of Previous Tealbook |
Previous Tealbook | |
|---|---|---|---|
| Short-Run Measures | |||
| Single-equation model | -1.6 | -1.9 | -2.0 |
| Small structural model | -1.5 | -2.1 | -2.4 |
| EDO model | 0.2 | 0.2 | -0.1 |
| FRB/US model | -2.1 | -2.4 | -2.5 |
| Confidence intervals for four model-based estimates | |||
| 70 percent confidence interval | -2.9 to 0.5 | ||
| 90 percent confidence interval | -3.9 to 1.6 | ||
| Tealbook-consistent measures | |||
| EDO model | -1.4 | -1.9 | -2.8 |
| FRB/US model | -1.5 | -1.6 | -2.0 |
| Medium-Run Measures | |||
| Single-equation model | 1.1 | 1.1 | 1.1 |
| Small structural model | 1.4 | 1.4 | 1.3 |
| Confidence intervals for two model-based estimates | |||
| 70 percent confidence interval | 0.3 to 2.2 | ||
| 90 percent confidence interval | -0.4 to 2.7 | ||
| TIPS-based factor model | 2.0 | 2.0 | |
| Memo | |||
| Actual real federal funds rate | -0.7 | -0.8 | |
Note: Explanatory Note A provides background information regarding the construction of these measures and confidence intervals. The actual real federal funds rate shown is based on lagged core inflation as a proxy for inflation expectations. For information regarding alternative measures, see Explanatory Note A. Estimates of r* may change at the beginning of a quarter even when there is no shift in the staff outlook because the twelve quarter horizon covered by the calculation has rolled forward one quarter. Therefore, whenever the Tealbook is published early in the quarter, this table includes a third column labeled "Current Quarter Estimate as of Previous Tealbook."
Constrained vs. Unconstrained Monetary Policy
(2 Percent Inflation Goal)
Figure: Nominal Federal Funds Rate
Line chart, by percent, 2010 to 2015. There are three series, "Current Tealbook: Constrained", "Current Tealbook: Unconstrained", and "Previous Tealbook: Unconstrained". Current Tealbook: Constrained begins in 2010:Q2 at about 0.25 and remains relatively constant here until 2013:Q4. It then generally increases to about 3.9 by 2015:Q4. Current Tealbook: Unconstrained begins in 2010:Q2 at about 0.25 and decreases to about -2.6 by 2012:Q1. It then increases to about 4.4 by 2015:Q4. Previous Tealbook: Unconstrained begins in 2010:Q2 at about 0.25 and decreases to about -3.0 by 2012:Q1. It then increases to about 4.4 by 2015:Q4.
Figure: Real Federal Funds Rate
Line chart, by percent, 2010 to 2015. There are three series, "Current Tealbook: Constrained", "Current Tealbook: Unconstrained", and "Previous Tealbook: Unconstrained". Current Tealbook: Constrained begins in 2010:Q2 at about -1.3 and generally increases to about -0.7 by 2011:Q1. It then generally decreases to about -1.4 by 2013:Q4 and then generally increases to about 1.8 by 2015:Q4. Current Tealbook: Unconstrained begins in 2010:Q2 at about -1.3 and increases to about -0.9 by 2010:Q4. It then decreases to about -4.0 by 2012:Q1 and then increases to about 2.5 by 2015:Q4. Previous Tealbook: Unconstrained begins in 2010:Q2 at about -1.3 and decreases to about -4.4 by 2012:Q2. It then increases to about 2.4 by 2015:Q4.
Figure: Civilian Unemployment Rate
Line chart, by percent, 2010 to 2015. There are three series, "Current Tealbook: Constrained", "Current Tealbook: Unconstrained", and "Previous Tealbook: Unconstrained". Current Tealbook: Constrained begins in 2010:Q2 at about 9.7 and generally decreases to about 4.4 by 2015:Q4. Current Tealbook: Unconstrained begins in 2010:Q2 at about 9.7 and generally decreases to about 4.6 by 2015:Q4. Previous Tealbook: Unconstrained begins in 2010:Q2 at about 9.75 and decreases to about 4.55 by 2015:Q4.
Figure: Core PCE Inflation (Four-quarter average)
Line chart, by percent, 2010 to 2015. There are three series, "Current Tealbook: Constrained", "Current Tealbook: Unconstrained", and "Previous Tealbook: Unconstrained". Current Tealbook: Constrained begins in 2010:Q2 at about 1.47 and decreases to about 0.8 by 2010:Q4. It then generally increases to about 2.15 by 2015:Q4. Current Tealbook: Unconstrained begins in 2010:Q2 at about 1.47 and decreases to about 0.8 by 2010:Q4. It then increases to about 2.13 by 2015:Q4. Previous Tealbook: Unconstrained begins in 2010:Q2 at about 1.47 and generally decreases to about 0.9 by 2010:Q4. It then generally increases to about 1.35 by 2011:Q4 and then generally decreases to about 1.3 by 2012:Q1. By 2015:Q4 it has generally increased to about 2.13.
Note: As discussed in the text note, the lines "Previous Tealbook" depict optimal control paths based on the previous Tealbook's staff outlook, but using the re-specified model under the new expectational assumptions.
The Policy Outlook in an Uncertain Environment
Figure: FRB/US Model Simulations of Estimated Outcome-Based Rule
Line chart, by percent, 2011 to 2014. There are four series, "Current Tealbook", "Previous Tealbook", "70 percent confidence interval" and "90 percent confidence interval". The Current Tealbook begins at about 0.1 in 2011:Q1 and remains stable here until 2012:Q2. It then increases to about 3.3 by 2014:Q4. The Previous Tealbook begins at about 0.1 in 2011:Q1 and remains constant here until 2012:Q3. It then increases to about 3.25 by 2014:Q4. The other 2 series closely track the Current Tealbook series throughout the chart, with the 70 percent confidence interval being about 2% both lesser and greater than the Current Tealbook series, and the 90 Percent confidence interval being about 3% both lesser and greater than the Current Tealbook series at any given point.
Note: In both panels, the dark and light shading represent the 70 and 90 percent confidence intervals respectively. As in the December Tealbook, the staff baseline projection for the federal funds rate is based on the outcome-based policy rule. Accordingly, this panel does not report a separate series for the staff's projected funds rate. Financial market quotes are as of January 19.
Figure: Information from Financial Markets
Line chart, by percent, 2011 to 2014. There are six series, "Current Tealbook", "Previous Tealbook", "Current 70 percent confidence interval", "Current 90 percent confidence interval", "Previous 70 percent confidence interval" and "Previous 90 percent confidence interval". The Current Tealbook begins at about 0.1 in 2011:Q1 and then generally increases to about 2.6 by 2014:Q4. The Previous Tealbook begins at about 0.1 in 2011:Q1 and then increases to about 2.05 by 2014:Q4. The other 2 Current series closely track the Current Tealbook series throughout the chart. The Current 70 percent confidence interval begins at a range of about [0.05, 0.15] in 2011:Q1 and then increases to about [1.3, 3.9] by 2014:Q4. The Current 90 percent confidence interval begins at a range of about [0.05, 0.2] in 2011:Q1 and then increases to about [0.9, 5.2] by 2014:Q4. The other 2 Previous series closely track the Previous Tealbook series throughout the chart. The Previous 70 percent confidence interval begins at a range of about [0, 0.2] in 2011:Q1 and then increases to about [0.95, 3.15] by 2014:Q4. The Previous 90 percent confidence interval begins at a range of about [0, 0.2] in 2011:Q1 and then increases to about [0.7, 4.3] by 2014:Q4.
Note: In both panels, the dark and light shading represent the 70 and 90 percent confidence intervals respectively. As in the December Tealbook, the staff baseline projection for the federal funds rate is based on the outcome-based policy rule. Financial market quotes are as of January 19.
Near-Term Prescriptions of Simple Policy Rules
| Constrained Policy | Unconstrained Policy | |||
|---|---|---|---|---|
| 2011Q1 | 2011Q2 | 2011Q1 | 2011Q2 | |
| Taylor (1993) rule | 0.13 | 0.13 | -0.91 | -0.77 |
| Previous Tealbook | 0.13 | 0.13 | -0.90 | -0.81 |
| Taylor (1999) rule | 0.13 | 0.13 | -3.93 | -3.64 |
| Previous Tealbook | 0.13 | 0.13 | -4.09 | -3.89 |
| Estimated outcome-based rule | 0.13 | 0.13 | -0.32 | -0.88 |
| Previous Tealbook | 0.13 | 0.13 | -0.42 | -1.05 |
| Estimated forecast-based rule | 0.13 | 0.13 | -0.26 | -0.69 |
| Previous Tealbook | 0.13 | 0.13 | -0.42 | -0.98 |
| First-difference rule | 0.29 | 0.48 | 0.29 | 0.48 |
| Previous Tealbook | 0.16 | 0.26 | 0.16 | 0.26 |
| 2011Q1 | 2011Q2 | |
|---|---|---|
| Staff assumption | 0.13 | 0.13 |
| Fed funds futures | 0.15 | 0.12 |
| Median expectation of primary dealers | 0.13 | 0.13 |
| Blue Chip forecast (January 1, 2011) | 0.18 | 0.18 |
Note: In calculating the near-term prescriptions of these simple policy rules, policymakers' long-run inflation objective is assumed to be 2 percent. Explanatory Note B provides further background information.
[Box:] Possible Implications of Misestimating the NAIRU
Figure: Alternative NAIRU Paths
Line chart, by percent, 2007 to 2018. There are three series, Tealbook projection, Higher effective NAIRU, and Policymakers' estimate of the effective NAIRU. Tealbook projection begins in 2007 at about 5.0 and remains constant here until 2008. It then increases to about 6.75 by 2010 and then generally decreases to about 5.25 by 2015. It remains constant here at 5.25 until 2018. Higher effective NAIRU begins in 2007 at about 5.0 and remains constant here until 2008. It then increases to about 6.75 by 2010 and remains constant here until 2018. Policymakers' estimate of the effective NAIRU begins in 2007 at about 5.0 and remains constant here until 2008. It then increases to about 6.75 by 2010 and then generally decreases to about 5.7 by 2014. By 2018 it has generally increased to about 6.75.
† Note: Data values for figures are rounded and may not sum to totals. Return to text