Accessible Material
January 2011 Tealbook B Tables and Charts†
Monetary Policy Alternatives
Table 1: Overview of Alternatives for the January 26 FOMC Statement
| Key Components |
December Statement |
January Alternatives | |||
|---|---|---|---|---|---|
| A | B | C | D | ||
| Economic Activity | |||||
| Recent Developments |
economic recovery is continuing, though insufficient to bring down unemployment |
economic recovery is continuing, though insufficient to bring about significant improvement in labor market conditions |
economic recovery is continuing |
||
| Household Spending |
increasing at a moderate pace |
increasing at a moderate pace but remains constrained by … |
growth picked up late last year but remains constrained by , , , |
growth has picked up | |
| Labor Market |
employers remain reluctant to add to payrolls; unemployment rate is elevated |
employers remain reluctant to add to payrolls; unemployment rate is elevated |
n.a. | ||
| Outlook | progress toward objectives has been disappointingly slow |
progress toward objectives remains disappointingly slow and there are still significant downside risks |
progress toward objectives has been disappointingly slow |
progress toward objectives has been slow; but some indications that the economic recovery is strengthening |
n.a. |
| Inflation | |||||
| Recent Developments |
expectations have remained stable, but underlying inflation have continued to trend downward; measures are somewhat low |
expectations have remained stable, but underlying inflation have been trending downward; measures are low |
although commodity prices have risen, expectations have remained stable and underlying inflation has been trending downward; measures are somewhat low |
underlying inflation has trended lower and expectations have remained stable, but commodity prices have risen noticeably |
|
| Outlook | same as "Economic Activity" outlook above | ||||
| Target Federal Funds Rate | |||||
| Intermeeting Period |
0 to ¼ percent | 0 to ¼ percent | |||
| Forward Guidance |
exceptionally low levels for an extended period |
exceptionally low levels at least through mid-2012 |
exceptionally low levels for an extended period |
low levels for some time |
|
| SOMA Portfolio Policy | |||||
| Approach | $600 billion of Treasuries by end of 2011:Q2, $75 billion per month |
$800 billion of Treasuries ($200b more than Nov.), $75 billion per month, through 2011:Q3 |
$600 billion of Treasuries by end of 2011:Q2, $75 billion per month |
$400 billion of Treasuries ($200b less than Nov.), $50 billion per month, through 2011:Q2 |
discontinue program announced in November |
| maintain reinvestment policy |
maintain reinvestment policy | maintain existing reinvestment policy for the time being |
|||
| Future Policy Action | |||||
| Approach | will regularly review and will adjust program as needed; will employ policy tools as necessary to support the recovery and to help ensure that inflation, over time, is at levels consistent with its mandate |
will regularly review and will adjust program as needed; will employ policy tools as necessary … |
continued practice of reviewing and remains prepared to adjust program as needed; will employ policy tools as necessary… |
will adjust program as needed; will employ policy tools as necessary to support the recovery and to help ensure that inflation, over time, is at levels [of 2 percent or a bit less, which it judges to be] consistent with its mandate |
will employ policy tools as necessary to promote maximum employment and price stability |
[Note: In the January FOMC Statement Alternatives, emphasis (strike-through) indicates strike-through text in the original document, and strong emphasis (bold) indicates bold red underlined text in the original document.]
January FOMC Statement--Alternative A
- 1. Information received since the Federal Open Market Committee met in November December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment about a significant improvement in labor market conditions. Household spending is increasing at a moderate pace, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year in recent quarters, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to been trending downward.
- 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been remains disappointingly slow and there are still significant downside risks to the economic outlook.
- 3. To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities. as announced in November. Moreover, in light of incoming information, the Committee now intends to increase its holdings of securities by a total of $800 billion--$200 billion more than announced in November--by purchasing longer-term Treasury securities at a pace of about $75 billion per month through the third quarter of 2011. In addition, the Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
- 4. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to currently anticipates that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period at least through mid-2012.
- 5. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.
January FOMC Statement--Alternative B
- 1. Information received since the Federal Open Market Committee met in November December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment about a significant improvement in labor market conditions. Growth in household spending is increasing at a moderate pace picked up late last year, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be is still weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, but and measures of underlying inflation have been trending downward.
- 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in the context of price stability, progress toward its objectives has been disappointingly slow.
- 3. To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities as announced in November. In particular, the Committee will is maintaining its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee and intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will continued its practice of regularly reviewing the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information, and will it remains prepared to adjust the program as needed to best foster maximum employment and price stability.
- 4. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
- 5. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.
January FOMC Statement--Alternative C
- 1. Information received since the Federal Open Market Committee met in November December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment about a significant improvement in labor market conditions. Growth in household spending is increasing at a moderate pace has picked up but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. and business investment is rising. However, employers remain reluctant to add to payrolls and the housing sector continues to be depressed. Although commodity prices have risen, longer-term inflation expectations have remained stable, but and measures of underlying inflation have been trending downward.
- 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, Progress toward the Committee's objectives has been disappointingly slow, but there are some indications that the economic recovery is strengthening.
- 3. To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to continue expanding its holdings of securities. as announced in November. However, in light of incoming information, the Committee now intends to increase its holdings of securities by a total of $400 billion--$200 billion less than announced in November--by purchasing longer-term Treasury securities at a pace of about $50 billion per month through the second quarter of 2011. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
- 4. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
- 5. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels [of 2 percent or a bit less, which the Committee judges to be] consistent with its mandate.
January FOMC Statement--Alternative D
- 1. Information received since the Federal Open Market Committee met in November December confirms that the economic recovery is continuing. though at a rate that has been insufficient to bring down unemployment. Growth in household spending is increasing at a moderate pace has picked up but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. The housing sector continues to be depressed. and business investment is rising. Measures of underlying inflation have trended lower in recent quarters and longer-term inflation expectations have remained stable, but measures of underlying inflation have continued to trend downward. commodity prices have risen noticeably.
- 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.
- 2. To promote a stronger pace of support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and anticipates that economic conditions are likely to warrant low levels for the federal funds rate for some time. However, the Committee judges that a further expansion of its securities holdings is not necessary to support a gradual return to higher levels of resource utilization in a context of price stability. Accordingly, the Committee decided today to continue expanding discontinue the asset purchase program it its holdings of securities as announced in November. For the time being, the Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.
- 3. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
- 3. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate promote maximum employment and price stability.
Long-Run Projections of the Balance Sheet and Monetary Base
Figure: Total Assets
Line chart, by billions of dollars, 2006 to 2020. Data are monthly. There are five series, Alt A, Alt B, Alt C, Alt D, and December Alt B. Alt A begins in 2006 at about 800 and generally increases slowly to about 950 by August 2008. It then steeply inclines to about 2250 by November 2008 and then generally decreases to about 1850 by December 2008. By 2011 it has generally increased to about 3100 and by September 2016 it has generally decreased to about 1500. It then increases to about 1800 by the end of 2020. Alt B begins in 2006 at about 800 and generally increases slowly to about 950 by August 2008. It then steeply inclines to about 2250 by November 2008 and then generally decreases to about 1850 by December 2008. By 2011 it has generally increased to about 2850 and by June 2016 it has generally decreased to about 1475. It then increases to about 1800 by the end of 2020. Alt C begins in 2006 at about 800 and generally increases slowly to about 950 by August 2008. It then steeply inclines to about 2250 by November 2008 and then generally decreases to about 1850 by December 2008. By 2011 it has generally increased to about 2650 and by March 2016 it has generally decreased to about 1450. It then increases to about 1800 by the end of 2020. Alt D begins in 2006 at about 800 and generally increases slowly to about 950 by August 2008. It then steeply inclines to about 2250 by November 2008 and then generally decreases to about 1850 by December 2008. By December 2010 it has generally increased to about 2400 and by October 2015 it has generally decreased to about 1425. It then increases to about 1800 by the end of 2020. November Alt B begins in 2006 at about 800 and generally increases slowly to about 950 by August 2008. It then steeply inclines to about 2250 by November 2008 and then generally decreases to about 1850 by December 2008. By 2011 it has generally increased to about 2845 and by March 2016 it has generally decreased to about 1475. It then increases to about 1810 by the end of 2020.
Source: Federal Reserve H.4.1 statistical release and staff calculations.
Growth Rates for the Monetary Base
| Date | Alternative B | Alternative A | Alternative C | Alternative D | Memo: December Alternative B |
|---|---|---|---|---|---|
| Percent, annual rate | |||||
| Monthly | |||||
| Apr-10 | -37.6 | -37.6 | -37.6 | -37.6 | -37.6 |
| May-10 | -2.0 | -2.0 | -2.0 | -2.0 | -2.0 |
| Jun-10 | -5.8 | -5.8 | -5.8 | -5.8 | -5.8 |
| Jul-10 | -2.2 | -2.2 | -2.2 | -2.2 | -2.2 |
| Aug-10 | -2.4 | -2.4 | -2.4 | -2.4 | -2.4 |
| Sep-10 | -10.1 | -10.1 | -10.1 | -10.1 | -10.1 |
| Oct-10 | -9.8 | -9.8 | -9.8 | -9.8 | -9.8 |
| Nov-10 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| Dec-10 | 18.7 | 18.7 | 18.7 | 18.7 | 14.0 |
| Jan-11 | 28.6 | 28.9 | 28.4 | 28.1 | 23.8 |
| Feb-11 | 98.9 | 97.8 | 86.6 | 74.0 | 66.1 |
| Mar-11 | 123.2 | 120.9 | 102.0 | 79.8 | 57.3 |
| Quarterly | |||||
| 2010 Q2 | -10.4 | -10.4 | -10.4 | -10.4 | -10.4 |
| 2010 Q3 | -3.9 | -3.9 | -3.9 | -3.9 | -3.9 |
| 2010 Q4 | -3.0 | -3.0 | -3.0 | -3.0 | -3.1 |
| 2011 Q1 | 52.2 | 51.8 | 46.5 | 40.7 | 33.5 |
| 2011 Q2 | 75.9 | 73.7 | 55.7 | 34.6 | 44.9 |
| Annual - Q4 to Q4 | |||||
| 2009 | 41.5 | 41.5 | 41.5 | 41.5 | 41.5 |
| 2010 | -0.9 | -0.9 | -0.9 | -0.9 | -1.1 |
| 2011 | 33.6 | 44.2 | 22.9 | 12.1 | 30.3 |
| 2012 | -0.9 | -0.9 | -1.0 | -1.0 | -1.2 |
| 2013 | -10.0 | -10.2 | -9.9 | -9.9 | -10.9 |
| 2014 | -19.3 | -19.1 | -19.6 | -19.9 | -19.4 |
| 2015 | -25.4 | -24.9 | -25.6 | -20.3 | -25.4 |
Note: Not seasonally adjusted.
Growth Rates of M2
| Tealbook Forecast * | ||
|---|---|---|
| Monthly Growth Rates | ||
| Jun-10 | 4.3 | |
| Jul-10 | 2.3 | |
| Aug-10 | 6.3 | |
| Sep-10 | 6.6 | |
| Oct-10 | 5.5 | |
| Nov-10 | 5.1 | |
| Dec-10 | 4.2 | |
| Jan-11 | 2.7 | |
| Feb-11 | 1.5 | |
| Mar-11 | 1.0 | |
| Apr-11 | 1.0 | |
| May-11 | 1.0 | |
| Jun-11 | 1.2 | |
| Quarterly Growth Rates | ||
| 2010 Q3 | 4.5 | |
| 2010 Q4 | 5.6 | |
| 2011 Q1 | 2.8 | |
| 2011 Q2 | 1.1 | |
| Annual Growth Rates | ||
| 2009 | 5.0 | |
| 2010 | 3.2 | |
| 2011 | 1.8 | |
| 2012 | 5.1 | |
* This forecast is consistent with nominal GDP and interest rates in the Tealbook forecast. Actual data through December 2010; projections thereafter. Return to table
[Note: In the January 2011 FOMC Directive Alternatives, emphasis (strike-through) indicates strike-through text in the original document, and strong emphasis (bold) indicates bold red underlined text in the original document.]
January 2011 FOMC Directive -- Alternative A
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to execute purchases of longer-term Treasury securities in order to increase the total face value of domestic securities held in the System Open Market Account to approximately $2.6 $2.8 trillion by the end of June September 2011. The Committee also directs the Desk to reinvest principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability.
January 2011 FOMC Directive -- Alternative B
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to execute purchases of longer-term Treasury securities in order to increase the total face value of domestic securities held in the System Open Market Account to approximately $2.6 trillion by the end of June 2011. The Committee also directs the Desk to reinvest principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability.
January 2011 FOMC Directive -- Alternative C
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to execute purchases of longer-term Treasury securities in order to increase the total face value of domestic securities held in the System Open Market Account to approximately $2.6 $2.4 trillion by the end of June 2011. The Committee also directs the Desk to reinvest principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability.
January 2011 FOMC Directive -- Alternative D
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to execute purchases of longer-term Treasury securities in order to increase maintain the total face value of domestic securities held in the System Open Market Account to at approximately $2.6 $2.2 trillion by the end of June 2011. The Committee also directs the Desk to by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability.
† Note: Data values for figures are rounded and may not sum to totals. Return to text