Presentation Materials (PDF)

Pages 191 to 226 of the Transcript

Appendix 1: Materials used by Mr. Laubach

Material for
Alternative Scenarios for Contingency Planning

Thomas Laubach
April 24, 2012

Class I FOMC - Restricted (FR)

Exhibit 1
Alternative Scenarios for Contingency Planning -- an Experiment

Top panel
Main Results from the Survey

• Nine said scenario 1 (Tealbook baseline) was closest to own modal outlook; most others saw stronger real activity and/or higher inflation
• Most thought differences across scenarios merited adjustments to their own individual assessments of appropriate monetary policy
• Ten specifically indicated that additional portfolio actions could be appropriate in some circumstances
• Enough information provided to infer views on whether the current policy should be maintained, tightened, or eased in each scenario
  • Eleven favored maintaining status quo or easier policy in scenario 1
  • Thirteen favored tighter policy in scenario 2; similar number in scenario 4
  • Twelve favored or would consider an easier policy in scenario 3
• Several cited risks (e.g., fiscal policy) as influences on their policy assessments

Middle-left panel
Which Scenario is Closest to Your Own Modal Outlook?

Middle-right panel
Do Conditions in Scenarios 2 to 4 Warrant a Change in Own Policy Assessment Relative to Scenario 1?

Bottom panel
Should Policy Be Tighter, Easier, or the Same as Current Policy?¹

Exhibit 2
Additional Results and Issues

• Many thought judging appropriate policy responses was difficult without more information for each scenario
• Frequently mentioned examples of other useful indicators included:
  • Additional inflation measures, house prices, broader range of financial market data, readings on foreign economic conditions, initial claims, and business surveys
  • Anecdotal information from business contacts
• Some questioned the general design of the exercise
  • Scenario descriptions did not identify fundamental shocks driving each scenario, nor how events would play out
  • Scenarios might be more useful if they provided this information
• Several participants offered general comments on the potential value of scenario exercises
  • Three said that they might be useful for internal deliberations, but further work was needed before they could be used in public communications
  • Two suggested that such exercises could help to provide information on the Committee's reaction function

Appendix 2: Materials used by Mr. Sack

Material for
FOMC Presentation: Financial Market Developments and Desk Operations

Brian Sack
April 24, 2012

Class II FOMC - Restricted FR

Exhibit 1

Top-left panel
(1)

Title: Ten-Year Treasury Yield
Series: Ten-year Treasury yield
Horizon: April 1, 2011 - April 20, 2012
Description: The ten-year Treasury yield exhibited notable volatility over the intermeeting period, increasing after the March FOMC meeting and decreasing after the March Employment Situation Report. It ended the period near the same low level observed over the past few months (near 2 percent).

Top-right panel
(2)

Title: Implied Federal Funds Rate Path
Series: Implied federal funds rate path derived from federal funds futures and eurodollar futures
Horizon: April 20, 2012 - June 30, 2015
Description: The expected path of the federal funds rate decreased on net over the intermeeting period, though intermeeting volatility left it significantly higher for a period of time.

Middle-left panel
(3)

Title: Probability Distribution of First Increase in Federal Funds Target Rate
Series: Average probabilities of first increase in federal funds target rate by half-year, as assessed in March and April Federal Reserve Bank of New York Surveys of primary dealers
Horizon: H1 2012 to H2 2016 or later
Description: Dealer survey respondents place sizable odds on policy remaining on hold for a long period. The distribution of expectations for the first federal funds rate increase did not appreciably change over the intermeeting period.

Middle-right panel
(4)

Title: Term Premium for Ten-Year Treasury Yield
Series: Estimate of term premium embedded in zero-coupon ten-year Treasury yield, as estimated by Kim-Wright model
Horizon: April 1, 2011 - April 20, 2012
Description: The Kim-Wright estimate of the ten-year term premium stands at roughly -0.5 percent, which is about 125 basis points below its average level since the late 1990s.

Bottom-left panel
(5) Decomposition of Decline in Ten-Year Yield Since June 2011*

Bottom-right panel
(6)

Title: Expected Change in SOMA Holdings (Over Subsequent Two Years)
Series: Expected change in SOMA holdings over subsequent two years, based on median response from FRBNY primary dealer survey. (The observation for March 2012 is based on a similar survey conducted by Macroeconomic Advisers.)
Horizon: January 2011 - March 2012
Description: The expected change in SOMA holdings has fluctuated since the beginning of 2011. As of March, there is a median expectation for an increase of $250 billion over the next two years.

Exhibit 2

Top-left panel
(7)

Title: Euro Area Sovereign Debt Spreads
Series: Spanish and Italian ten-year spreads to Germany
Horizon: April 1, 2011 - April 20, 2012
Description: Sovereign debt spreads for peripheral European countries have increased since mid-March, concurrent with some reemergence of financial stress in Europe. Spanish spreads to Germany are now above French spreads, attributable in some part to setbacks to its planned fiscal consolidation measures.

Top-right panel
(8)

Title: Patterns in Euro Area Sovereign Debt
Series: Change in bank holdings of euro area sovereign debt from November 2011 to February 2012 by bank country; projected 2012 net issuance by sovereign
Horizon: November 2011 - February 2012; January 2012 - December 2012
Description: Italian and Spanish banks increased their holdings of euro area sovereign debt to a large extent since November, which has been attributed in large part to the European Central Bank's three-year LTROs. Indeed, the increase over those several months outstripped the estimated net funding needs of Spain and Italy over the entirety of 2012. German banks' holdings of euro area debt decreased slightly, and Germany has very little estimated net 2012 issuance.

Middle-left panel
(9)

Title: 3-Month Libor-OIS Spreads
Series: Euro-denominated and dollar-denominated three-month Libor-OIS
Horizon: April 1, 2011 - April 20, 2012
Description: Spreads indicating funding stresses continued to decrease over the intermeeting period, though they flattened out over the second half of the period.

Middle-right panel
(10)

Title: Bank Equity Prices
Series: KBW Bank Index and Euro Stoxx Bank Index, indexed to 04/01/11
Horizon: April 1, 2011 - April 20, 2012
Description: U.S. bank equity prices reacted positively to the Comprehensive Capital Analysis and Review results released at the beginning of the intermeeting period, and were roughly flat on net on the period. In contrast, European bank stocks have fallen sharply, returning to the levels observed late last year.

Bottom-left panel
(11)

Title: Financial CDS Spreads
Series: Average five-year CDS spreads of major European financials, major U.S. financials
Horizon: April 1, 2011 - April 20, 2012
Description: Financial CDS spreads have increased to some extent in the U.S. and to a greater extent in Europe, in response to macroeconomic uncertainty, European risks, and looming downgrades from Moody's.

Bottom-right panel
(12)

Title: Equity Prices and Corporate Debt Spreads
Series: S&P 500 Index, Bank of America-Merrill Lynch High Yield Spread to Treasuries Index
Horizon: April 1, 2011 - April 20, 2012
Description: U.S. equity prices showed roughly the same pattern as interest rates, with increases earlier in the period giving way to a retracement as growth optimism faltered and risk concerns reemerged. High-yield bond spreads moved slightly higher.

Exhibit 3

Top-left panel
(13) Operations for Maturity Extension Program (Through 04/23/12)

Top-right panel
(14)

Title: SOMA Treasury Holdings by Maturity*
Series: SOMA holdings with 0-3 years to maturity, with 3-6 years to maturity, and with 6-30 years to maturity
Horizon: April 1, 2011 - April 20, 2012
Description: Since the start of the Maturity Extension Program, SOMA holdings of longer-term Treasuries have increased notably, while holdings of shorter-term securities have decreased, consistent with the increase in portfolio duration.

Middle-left panel
(15)

Title: SOMA Holdings as Percent of Outstanding*
Series: SOMA holdings of Treasuries with 0-3, 3-6, and 6-30 years to maturity as a percent of outstanding in those respective maturity ranges, and 15- and 30-year MBS holdings as a percent of outstanding.
Horizon: July 31, 2007; September 30, 2011; June 30, 2012 (projected)
Description: The shift in the composition of SOMA holdings under the Maturity Extension Program (MEP) has left the portfolio with a relatively high portion of the outstanding stock of longer-term Treasuries, particularly as compared to pre-crisis levels and pre-MEP levels. Shorter-term Treasuries have fallen as a share of outstanding since pre-crisis. The agency MBS reinvestment program is keeping SOMA holdings of those securities relatively stable as a percent of outstanding, at roughly 20 percent.

Middle-right panel
(16)

Title: Treasury and MBS Trading Volumes
Series: 12-week moving averages of total weekly primary dealer volumes of Treasuries and agency MBS, as reported in FR 2004
Horizon: January 1, 2005 - April 18, 2012
Description: Despite the size of the Federal Reserve's presence in Treasury and MBS markets, liquidity and market functioning appear to be holding up well, as trading volumes are near their normal levels observed since 2005.

Bottom-left panel
(17)

Title: Probability of Additional Policy Actions
Series: Federal Reserve Bank of New York Survey additional policy action responses by primary dealers
Horizon: Current meeting & 1 year
Description: Participants placed some probability on the possibility of additional easing over the next year, with about a 45 percent median probability of further asset purchases, 30 percent probability of a change in the rate guidance, and 20 percent probability of an increase in SOMA duration. Expectations for any additional policy actions at the April meeting were minimal.

Bottom-right panel
(18)

Title: Changes to Macroeconomic Forecasts That Would Prompt Change in Policy
Series: Required change to the projection for Q4 2014 unemployment or inflation (as listed in the Summary of Economic Projections) that would prompt a shortening of the forward rate guidance or an expansion of the balance sheet, holding the other variable fixed, based on median responses from FRBNY Survey.
Horizon: N/A
Description: Dealers thought that there would have to be a 1/2 percentage point downward revision to the projected unemployment rate, holding fixed the projection for inflation, in order for the FOMC to shorten the policy guidance in the FOMC statement; they thought it would take a 1/2 percentage point increase in the projection for inflation to prompt a change in the guidance; they thought that additional asset purchases would be warranted if the unemployment projection were to increase by 0.4 percentage points or if the forecast for inflation were to fall by 0.3 percentage points. The results indicate that market participants take these policy measures to be conditioned on the economic outlook.

Appendix 3: Materials used by Mr. Wilcox

Material for
Forecast Summary

David Wilcox
April 24, 2012

Class II FOMC - Restricted (FR)

Forecast Summary

Confidence Intervals Based on Tealbook Track Record

Top-left panel
Unemployment Rate

Top-right panel
Real GDP

Middle-left panel
PCE Prices

Middle-right panel
Unemployment Effects of Matching Efficiency

Bottom-left panel
Measures of Labor Market Slack

Bottom-right panel
Dispersion of House Price Changes across 383 Metropolitan Areas

Appendix 4: Materials used by Ms. Liang

Material for
FOMC Presentation: Financial Stability

Nellie Liang
April 24, 2012

Class II FOMC - Restricted (FR)

Exhibit 1
Risks and Vulnerabilities of MMFs and BHCs

Top panel
U.S. Equity Correlation with Selected European CDS Premiums*

Middle-left panel
MMF European Holdings, by Maturity

Middle-right panel
Stock Prices for Select U.S. Banks

Bottom-left panel
5-Year CDS Premiums for Select U.S. Banks

Bottom-right panel
Moody's Ratings Review, Feb. 2012

• Five of the largest U.S. BHCs on review for downgrades
  • Related to structural vulnerabilities of global capital markets business
• Possible P-2 and Baa ratings for:
  • Morgan Stanley
  • Bank subsidiaries of:
    • - Bank of America
    • - Citigroup

Exhibit 2
Balance Sheet Structure of BHCs and Dealer Firms

Exhibit 3
Asset Valuations and Leverage

Top-left panel
Gross Issuance by Nonfinancial U.S. Corporations

Top-right panel
High Yield Bond Near- and Far-Term Spreads

Middle-left panel
Triparty Repo Market Activity

Middle-right panel
Securities Lending Activity

Bottom panel
Low Interest Rates Could Create New Vulnerabilities

• Could be one impetus for new financial products
  • For example, Exchange Traded Notes offer leveraged returns
  • Limited aggregate size, but will monitor growth and complexity
• Financial institutions look to enhance returns
  • Pension funds or insurance companies with target returns may take on excessive risk
  • Depository institutions could mismanage the risks of unexpected shifts in the yield curve

Appendix 5: Materials used by Ms. Weinbach

Material for Briefing on the
Summary of Economic Projections

Gretchen Weinbach
April 24, 2012

Class I FOMC - Restricted Controlled (FR)

Exhibit 1. Central tendencies and ranges of economic projections, 2012-14 and over the longer run

Change in real GDP

Unemployment rate

PCE inflation

Core PCE inflation

Exhibit 2. Overview of FOMC participants' assessments of appropriate monetary policy, April 2012

Appropriate Timing of Policy Firming

Appropriate Pace of Policy Firming

Appropriate Pace of Policy Firming

Exhibit 3. Scatter Plot of Unemployment and PCE Inflation Rates in the Liftoff Year

Exhibit 4. Economic projections for 2012-2014 and over the longer run (percent)

Change in real GDP

Unemployment rate

PCE inflation

Core PCE inflation

Exhibit 5. Uncertainty and risks in economic projections

Histograms, eight panels.

Uncertainty about GDP growth

Uncertainty about the unemployment rate

Uncertainty about PCE inflation

Uncertainty about core PCE inflation

Risks to GDP growth

Risks to the unemployment rate

Risks to PCE inflation

Risks to core PCE inflation

Appendix 6: Materials used by Mr. English

Material for
FOMC Briefing on Monetary Policy Alternatives

Bill English
April 24-25, 2012

Class I FOMC - Restricted Controlled (FR)

March FOMC Statement

• 1. Information received since the Federal Open Market Committee met in January suggests that the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.
• 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.
• 3. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
• 4. The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

[Note: In the April 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.]

April FOMC Statement--Alternative A

• 1. Information received since the Federal Open Market Committee met in January March suggests that the economy has been expanding moderately. Labor market conditions have improved further in recent months; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued picked up somewhat in recent months, although mainly reflecting higher prices of crude oil and gasoline have increased lately. However, longer-term inflation expectations have remained stable.
• 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate anticipates that, absent further policy stimulus, economic growth over coming quarters would be unacceptably slow and consequently anticipates that the unemployment rate will would decline only very gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices earlier this year will push up is reducing consumers' purchasing power while boosting inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.
• 3.1 To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to continue expand its program to extend the average maturity of its holdings of securities as announced in September. After completing the transactions that it announced last September, the Committee intends to purchase, between July 2012 and the end of March 2013, an additional $400 billion of Treasury securities with remaining maturities of 6 years to 30 years, and to sell an equal amount of Treasury securities with remaining maturities of 4 years or less. These transactions should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.
  OR
  
• 3.2 To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to continue its purchase an additional $500 billion of agency mortgage-backed securities by the end of April 2013. The Committee also will complete the program to extend the average maturity of its holdings of securities as that it announced in September. These transactions should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.
• 4. The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions --including low rates of resource utilization and a subdued outlook for inflation over the medium run-- are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
• 5. In judging the appropriate stance of monetary policy, the Committee will consider a range of factors, including rates of resource utilization, the projected pace of improvement in labor market conditions, the contours of the medium-run inflation outlook, the stability of longer-run inflation expectations, and the balance of risks that could impede the attainment of the Committee's goals.

April FOMC Statement--Alternative B

• 1. Information received since the Federal Open Market Committee met in January March suggests that the economy has been expanding moderately. Labor market conditions have improved further in recent months; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. Despite some tentative signs of improvement, the housing sector remains depressed. Inflation has been subdued picked up somewhat in recent months, although mainly reflecting higher prices of crude oil and gasoline have increased lately. However, longer-term inflation expectations have remained stable.
• 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth to remain moderate over coming quarters and then to pick up gradually, supported by highly accommodative monetary policy. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that the Committee it judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices earlier this year will push up is expected to affect inflation only temporarily, but and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.
• 3. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
• 4. The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

April FOMC Statement--Alternative C

• 1. Information received since the Federal Open Market Committee met in January March suggests that the economy has been expanding moderately economic recovery has continued to strengthen. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated somewhat more, and private payrolls have expanded moderately on average in recent months. Household spending and business fixed investment have continued to advance. The housing sector remains depressed but has shown some signs of improvement. Sizable increases in the prices of crude oil and gasoline have pushed up inflation somewhat has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable.
• 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters to pick up over time and consequently anticipates that the unemployment rate will decline gradually move appreciably closer, over the next few years, to toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices earlier this year will push up is expected to affect inflation only temporarily, but; the Committee anticipates that subsequently, with appropriate monetary policy, inflation over the medium term will run at or below close to the rate that it judges most consistent with its dual mandate.
• 3.1 To support a stronger sustainable economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. In judging when to first increase its target for the federal funds rate, the Committee will consider a range of factors, including rates of resource utilization, the projected pace of improvement in labor market conditions, the contours of the medium-run inflation outlook, the stability of longer-run inflation expectations, and the balance of risks that could impede the attainment of the Committee's goals.
  OR
  
• 3.2 To support a stronger sustainable economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and. In light of the improvement in the economic outlook, the Committee currently now anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014 until mid-2013.
• 4. The Committee also decided to continue its complete in June the program to extend the average maturity of its holdings of securities as that it announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate necessary to promote a stronger economic recovery in a context of maximum employment and price stability.

March 2012 Directive

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 1/4 percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. 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: In the April 2012 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.]

April 2012 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 1/4 percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. In addition, the Committee directs the Desk to purchase, between July 2012 and the end of March 2013, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 4 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities; in order these actions are intended to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. 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.
OR

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 1/4 percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. In addition, the Committee directs the Desk to execute purchases of agency mortgage-backed securities in order to increase the total face value of domestic securities held in the System Open Market Account to approximately $3.1 trillion by the end of April 2013. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. 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.

April 2012 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 1/4 percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. 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.

April 2012 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 1/4 percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. 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.

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