Accessible Version
Meeting of the Federal Open Market Committee
July 31-August 1, 2012 Presentation Materials
Pages 266 to 304 of the Transcript
Appendix 1: Materials used by Mr. Faust
Presentation on
Simple Rules for Monetary Policy
Jon W. Faust
July 31, 2012
Class I FOMC - Restricted Controlled (FR)
Exhibit 1
Top-left panel
1. Historical Tracking of Taylor (1993)
percent
| Period | Federal Funds Rate Target | Taylor Rule |
|---|---|---|
| March 1988 | 6.50 | 7.57 |
| May 1988 | 7.00 | 7.86 |
| June 1988 | 7.50 | 7.84 |
| August 1988 | 8.13 | 8.29 |
| September 1988 | 8.13 | 8.20 |
| November 1988 | 8.13 | 8.15 |
| December 1988 | 8.38 | 8.45 |
| February 1989 | 9.00 | 8.55 |
| March 1989 | 9.75 | 8.81 |
| May 1989 | 9.75 | 8.87 |
| July 1989 | 9.56 | 8.67 |
| August 1989 | 9.00 | 8.60 |
| October 1989 | 9.00 | 8.32 |
| November 1989 | 8.50 | 8.00 |
| December 1989 | 8.50 | 7.97 |
| February 1990 | 8.25 | 8.55 |
| March 1990 | 8.25 | 8.33 |
| May 1990 | 8.25 | 8.71 |
| July 1990 | 8.25 | 8.90 |
| August 1990 | 8.00 | 9.08 |
| October 1990 | 8.00 | 9.56 |
| November 1990 | 7.75 | 9.01 |
| December 1990 | 7.25 | 8.61 |
| February 1991 | 6.75 | 7.27 |
| March 1991 | 6.00 | 8.07 |
| May 1991 | 5.75 | 7.24 |
| July 1991 | 5.75 | 6.35 |
| August 1991 | 5.50 | 6.60 |
| October 1991 | 5.25 | 6.50 |
| November 1991 | 5.25 | 6.06 |
| December 1991 | 4.50 | 5.62 |
| February 1992 | 4.00 | 4.74 |
| March 1992 | 4.00 | 5.04 |
| May 1992 | 3.75 | 5.31 |
| June 1992 | 3.75 | 5.25 |
| August 1992 | 3.25 | 4.55 |
| October 1992 | 3.00 | 4.45 |
| November 1992 | 3.00 | 4.17 |
| December 1992 | 3.00 | 4.85 |
| February 1993 | 3.00 | 4.69 |
| March 1993 | 3.00 | 5.16 |
| May 1993 | 3.00 | 4.94 |
| July 1993 | 3.00 | 4.91 |
| August 1993 | 3.00 | 4.74 |
| September 1993 | 3.00 | 4.92 |
| November 1993 | 3.00 | 4.91 |
| December 1993 | 3.00 | 4.97 |
| February 1994 | 3.00 | 5.08 |
| March 1994 | 3.25 | 5.07 |
| May 1994 | 3.75 | 5.02 |
| July 1994 | 4.25 | 5.36 |
| August 1994 | 4.25 | 5.65 |
| September 1994 | 4.75 | 5.66 |
| November 1994 | 4.75 | 6.11 |
| December 1994 | 5.50 | 5.92 |
| January 1995 | 5.50 | 6.07 |
| March 1995 | 6.00 | 5.92 |
| May 1995 | 6.00 | 5.96 |
| July 1995 | 6.00 | 5.57 |
| August 1995 | 5.75 | 5.56 |
| September 1995 | 5.75 | 5.57 |
| November 1995 | 5.75 | 5.79 |
| December 1995 | 5.75 | 5.84 |
| February 1996 | 5.50 | 5.37 |
| March 1996 | 5.25 | 5.29 |
| May 1996 | 5.25 | 5.54 |
| July 1996 | 5.25 | 5.58 |
| August 1996 | 5.25 | 5.67 |
| September 1996 | 5.25 | 5.60 |
| November 1996 | 5.25 | 5.62 |
| December 1996 | 5.25 | 5.59 |
| February 1997 | 5.25 | 5.55 |
| March 1997 | 5.25 | 5.71 |
| May 1997 | 5.50 | 5.92 |
| July 1997 | 5.50 | 5.92 |
| August 1997 | 5.50 | 5.94 |
| September 1997 | 5.50 | 5.87 |
| November 1997 | 5.50 | 5.63 |
| December 1997 | 5.50 | 5.55 |
| February 1998 | 5.50 | 5.50 |
| March 1998 | 5.50 | 5.70 |
| May 1998 | 5.50 | 5.53 |
| June 1998 | 5.50 | 5.62 |
| August 1998 | 5.50 | 5.53 |
| September 1998 | 5.50 | 5.74 |
| November 1998 | 5.00 | 5.82 |
| December 1998 | 4.75 | 6.06 |
| February 1999 | 4.75 | 6.32 |
| March 1999 | 4.75 | 5.94 |
| May 1999 | 4.75 | 5.62 |
| July 1999 | 4.75 | 5.86 |
| August 1999 | 5.00 | 5.46 |
| October 1999 | 5.25 | 5.68 |
| November 1999 | 5.25 | 5.67 |
| December 1999 | 5.50 | 5.47 |
| February 2000 | 5.50 | 5.72 |
| April 2000 | 6.00 | 5.79 |
| May 2000 | 6.00 | 6.44 |
| June 2000 | 6.50 | 6.22 |
| August 2000 | 6.50 | 6.03 |
| October 2000 | 6.50 | 5.97 |
| November 2000 | 6.50 | 6.06 |
| December 2000 | 6.50 | 5.78 |
| January 2001 | 6.00 | 5.19 |
| March 2001 | 5.50 | 5.19 |
| May 2001 | 4.50 | 5.20 |
| June 2001 | 4.00 | 5.14 |
| August 2001 | 3.75 | 5.04 |
| October 2001 | 3.00 | 5.01 |
| November 2001 | 2.50 | 4.41 |
| December 2001 | 2.00 | 4.31 |
| January 2002 | 1.75 | 4.14 |
| March 2002 | 1.75 | 4.44 |
| May 2002 | 1.75 | 4.22 |
| June 2002 | 1.75 | 4.21 |
| August 2002 | 1.75 | 3.82 |
| September 2002 | 1.75 | 4.06 |
| November 2002 | 1.75 | 3.60 |
| December 2002 | 1.25 | 3.57 |
| January 2003 | 1.25 | 3.00 |
| March 2003 | 1.25 | 3.03 |
| May 2003 | 1.25 | 2.53 |
| June 2003 | 1.25 | 2.24 |
| August 2003 | 1.00 | 2.05 |
| September 2003 | 1.00 | 1.98 |
| October 2003 | 1.00 | 2.28 |
| December 2003 | 1.00 | 2.33 |
| January 2004 | 1.00 | 2.20 |
| March 2004 | 1.00 | 2.02 |
| May 2004 | 1.00 | 2.76 |
| June 2004 | 1.00 | 3.36 |
| August 2004 | 1.25 | 3.50 |
| September 2004 | 1.50 | 3.28 |
| November 2004 | 1.75 | 3.76 |
| December 2004 | 2.00 | 3.87 |
| February 2005 | 2.25 | 3.91 |
| March 2005 | 2.50 | 4.05 |
| May 2005 | 2.75 | 4.06 |
| June 2005 | 3.00 | 4.02 |
| August 2005 | 3.25 | 4.47 |
| September 2005 | 3.50 | 4.26 |
| November 2005 | 3.75 | 4.11 |
| December 2005 | 4.00 | 4.20 |
| January 2006 | 4.25 | 4.25 |
| March 2006 | 4.50 | 4.26 |
| May 2006 | 4.75 | 4.75 |
| June 2006 | 5.00 | 4.91 |
| August 2006 | 5.25 | 5.72 |
| September 2006 | 5.25 | 5.70 |
| October 2006 | 5.25 | 5.70 |
| December 2006 | 5.25 | 5.52 |
| January 2007 | 5.25 | 5.39 |
| March 2007 | 5.25 | 5.35 |
| May 2007 | 5.25 | 5.06 |
| June 2007 | 5.25 | 4.87 |
| August 2007 | 5.25 | 4.74 |
| September 2007 | 5.25 | 4.77 |
| October 2007 | 4.75 | 4.87 |
| December 2007 | 4.50 | 4.87 |
Top-right panel
2. The Case for Simple Rules
- Simple policy rules can,
- - capture most of the benefits of sound policy that policymakers can realistically hope to attain.
- - provide a transparent and predictable link between the policy rate and macroeconomic determinants.
- - provide a useful discipline on the exercise of discretion.
Bottom panel
3. Six Simple Policy Rules
| Taylor (1993): | $$ R_t=2.25+\pi_t+0.5\left(\pi_t-\pi^*\right)+0.5{gap}_t$$ |
|---|---|
| Taylor (1999): | $$ R_t=2.25+\pi_t+0.5\left(\pi_t-\pi^*\right)+1.0{gap}_t$$ |
| Inertial Taylor (1999): | $$ R_t=0.85R_{t-1}+0.15\left[2.25+\pi_t+0.5\left(\pi_t-\pi^*\right)+1.0{gap}_t\right]$$ |
| Outcome-based: | $$ R_t=0.81R_{t-1}+0.19\left[2.25+\pi_t+0.73\left(\pi_t-\pi^*\right)+.94{gap}_t+2.72\Delta{gap}_t+2.05\Delta{R}_{t-1}\right]$$ |
| First-difference: | $$ R_t=R_{t-1}+0.5\left(\pi_{t+3|t}-\pi^*\right)+0.5\Delta^4{gap}_{t+3|t}$$ |
| Nominal income targeting: | $$ R_t=0.75R_{t-1}+0.25\left(2.25+\pi^*+yn_t-yn_t^*\right)$$ |
$$ R$$ is the federal funds rate; $$ \pi$$ is generally the trailing, four-quarter rate of core PCE inflation; in the first-difference rule, $$ \pi$$ is the projected four-quarter rate of headline inflation; $$ \pi^*$$ is 2, the Committee's inflation target; and $$ gap$$ is the staff estimate of the output gap. In the nominal income targeting rule, $$ yn_t$$ is 100 times the log of the level of nominal GDP and $$ yn_t^*$$ is 100 times the log of potential nominal GDP, where potential nominal GDP is defined as potential real GDP multiplied by a price target equal to the GDP price index in the fourth quarter of 2007 and growing thereafter at a rate of 2 percent per year.
Exhibit 2
Top panel
1. Output Gap Measurement and the First-Difference Rule
- Output gap is subject to substantial measurement error in practice.
- Prescription of the first-difference rule is largely invariant to measured level of the gap.
- In response to realistic measurement error, a substantial response to level of the output gap probably remains appropriate.
Middle-left panel
2. Policy Simulations: Unemployment Rate
percent
| Period | Nominal Income Targeting Rule | Taylor (1999) Rule | NAIRU |
|---|---|---|---|
| 2012:Q1 | 8.241 | 8.241 | 6.000 |
| 2012:Q2 | 8.173 | 8.173 | 6.000 |
| 2012:Q3 | 8.255 | 8.253 | 6.000 |
| 2012:Q4 | 8.276 | 8.297 | 6.000 |
| 2013:Q1 | 8.129 | 8.189 | 6.000 |
| 2013:Q2 | 8.074 | 8.187 | 6.000 |
| 2013:Q3 | 7.968 | 8.142 | 6.000 |
| 2013:Q4 | 7.873 | 8.112 | 6.000 |
| 2014:Q1 | 7.757 | 8.063 | 6.000 |
| 2014:Q2 | 7.629 | 7.999 | 6.000 |
| 2014:Q3 | 7.481 | 7.914 | 6.000 |
| 2014:Q4 | 7.325 | 7.816 | 6.000 |
| 2015:Q1 | 7.107 | 7.653 | 5.938 |
| 2015:Q2 | 6.899 | 7.496 | 5.875 |
| 2015:Q3 | 6.696 | 7.340 | 5.813 |
| 2015:Q4 | 6.504 | 7.188 | 5.750 |
| 2016:Q1 | 6.315 | 7.030 | 5.688 |
| 2016:Q2 | 6.132 | 6.867 | 5.625 |
| 2016:Q3 | 5.957 | 6.702 | 5.563 |
| 2016:Q4 | 5.793 | 6.535 | 5.500 |
| 2017:Q1 | 5.641 | 6.370 | 5.438 |
| 2017:Q2 | 5.505 | 6.209 | 5.375 |
| 2017:Q3 | 5.372 | 6.053 | 5.313 |
| 2017:Q4 | 5.243 | 5.903 | 5.250 |
| 2018:Q1 | 5.183 | 5.820 | 5.250 |
| 2018:Q2 | 5.132 | 5.742 | 5.250 |
| 2018:Q3 | 5.090 | 5.669 | 5.250 |
| 2018:Q4 | 5.057 | 5.600 | 5.250 |
| 2019:Q1 | 5.034 | 5.537 | 5.250 |
| 2019:Q2 | 5.021 | 5.481 | 5.250 |
| 2019:Q3 | 5.019 | 5.434 | 5.250 |
| 2019:Q4 | 5.026 | 5.395 | 5.250 |
| 2020:Q1 | 5.042 | 5.364 | 5.250 |
| 2020:Q2 | 5.064 | 5.341 | 5.250 |
| 2020:Q3 | 5.093 | 5.326 | 5.250 |
| 2020:Q4 | 5.124 | 5.314 | 5.250 |
| 2021:Q1 | 5.155 | 5.305 | ND |
Middle-right panel
3. Policy Simulations: Inflation
PCE 4-quarter average
percent
| Period | Nominal Income Targeting Rule | Taylor (1999) Rule |
|---|---|---|
| 2012:Q1 | 2.334 | 2.334 |
| 2012:Q2 | 1.697 | 1.697 |
| 2012:Q3 | 1.413 | 1.317 |
| 2012:Q4 | 1.574 | 1.397 |
| 2013:Q1 | 1.431 | 1.164 |
| 2013:Q2 | 1.749 | 1.382 |
| 2013:Q3 | 1.930 | 1.556 |
| 2013:Q4 | 1.938 | 1.540 |
| 2014:Q1 | 1.900 | 1.487 |
| 2014:Q2 | 1.851 | 1.429 |
| 2014:Q3 | 1.828 | 1.402 |
| 2014:Q4 | 1.829 | 1.401 |
| 2015:Q1 | 1.875 | 1.448 |
| 2015:Q2 | 1.922 | 1.497 |
| 2015:Q3 | 1.973 | 1.553 |
| 2015:Q4 | 2.027 | 1.611 |
| 2016:Q1 | 2.047 | 1.637 |
| 2016:Q2 | 2.069 | 1.665 |
| 2016:Q3 | 2.091 | 1.693 |
| 2016:Q4 | 2.109 | 1.719 |
| 2017:Q1 | 2.133 | 1.753 |
| 2017:Q2 | 2.156 | 1.787 |
| 2017:Q3 | 2.176 | 1.821 |
| 2017:Q4 | 2.194 | 1.853 |
| 2018:Q1 | 2.201 | 1.878 |
| 2018:Q2 | 2.204 | 1.900 |
| 2018:Q3 | 2.204 | 1.920 |
| 2018:Q4 | 2.201 | 1.940 |
| 2019:Q1 | 2.195 | 1.959 |
| 2019:Q2 | 2.188 | 1.976 |
| 2019:Q3 | 2.178 | 1.993 |
| 2019:Q4 | 2.166 | 2.008 |
| 2020:Q1 | 2.153 | 2.022 |
| 2020:Q2 | 2.139 | 2.035 |
| 2020:Q3 | 2.123 | 2.047 |
| 2020:Q4 | 2.106 | 2.057 |
| 2021:Q1 | 2.088 | 2.066 |
Bottom-left panel
4. Distribution of Liftoff Date
probability
| Period | Outcome-based Rule | Modified Outcome-based Rule | Inertial Taylor (1999) Rule |
|---|---|---|---|
| 2012:Q3 | 0.156 | 0.000 | 0.000 |
| 2012:Q4 | 0.201 | 0.000 | 0.038 |
| 2013:Q1 | 0.102 | 0.080 | 0.056 |
| 2013:Q2 | 0.097 | 0.116 | 0.065 |
| 2013:Q3 | 0.087 | 0.108 | 0.075 |
| 2013:Q4 | 0.066 | 0.104 | 0.087 |
| 2014:Q1 | 0.052 | 0.090 | 0.076 |
| 2014:Q2 | 0.043 | 0.080 | 0.069 |
| 2014:Q3 | 0.041 | 0.076 | 0.066 |
| 2014:Q4 | 0.035 | 0.064 | 0.064 |
| 2015:Q1 | 0.024 | 0.051 | 0.060 |
| 2015:Q2 | 0.021 | 0.047 | 0.052 |
| 2015:Q3 | 0.013 | 0.035 | 0.046 |
| 2015:Q4 | 0.012 | 0.030 | 0.040 |
| 2016:Q1 | 0.011 | 0.025 | 0.036 |
| 2016:Q2 | 0.009 | 0.019 | 0.032 |
| 2016:Q3 | 0.007 | 0.017 | 0.028 |
| 2016:Q4 | 0.006 | 0.015 | 0.025 |
Bottom-right panel
5. Likelihood of Return to ELB within 4 Quarters
probability
| Period | Outcome-based Rule | Modified Outcome-based Rule | Inertial Taylor (1999) Rule |
|---|---|---|---|
| 2012:Q3 | 0.609 | ND | ND |
| 2012:Q4 | 0.557 | ND | 0.244 |
| 2013:Q1 | 0.470 | 0.330 | 0.188 |
| 2013:Q2 | 0.409 | 0.307 | 0.138 |
| 2013:Q3 | 0.377 | 0.293 | 0.107 |
| 2013:Q4 | 0.371 | 0.252 | 0.104 |
| 2014:Q1 | 0.332 | 0.228 | 0.084 |
| 2014:Q2 | 0.283 | 0.187 | 0.070 |
| 2014:Q3 | 0.310 | 0.198 | 0.053 |
| 2014:Q4 | 0.286 | 0.195 | 0.047 |
| 2015:Q1 | 0.265 | 0.176 | 0.046 |
| 2015:Q2 | 0.315 | 0.165 | 0.041 |
| 2015:Q3 | 0.246 | 0.150 | 0.038 |
| 2015:Q4 | 0.219 | 0.139 | 0.029 |
| 2016:Q1 | 0.208 | 0.146 | 0.020 |
| 2016:Q2 | 0.219 | 0.121 | 0.028 |
| 2016:Q3 | 0.257 | 0.088 | 0.011 |
| 2016:Q4 | 0.190 | 0.120 | 0.016 |
Note: probability of return to effective lower bound (ELB) conditional on initial liftoff date.
Exhibit 3
Top panel
1. Reasons to Deviate from Standard Simple Rules at Present
- Optimal policy computations (under perfect foresight) suggest maintaining accommodation longer than simple rules suggest.
- Nonstandard structural features of economy at present might warrant deviating.
- Risk management considerations argue for extra accommodation to offset asymmetric risks that bias economy toward effective lower bound.
Middle panel
2. Simple Rules in a Comprehensive Policy Framework
- Research supports that simple rules capture much of what good policy should aspire to in normal times.
- Simple rules could be a useful part of, but are not a substitute for, a comprehensive policy framework.
- Principles of forecast-based targeting could also be a useful part of an overall framework.
Appendix 2: Materials used by Mr. Potter
Material for
FOMC Presentation: Financial Market Developments and Desk Operations
Simon Potter
July 31, 2012
Class II FOMC - Restricted FR
Exhibit 1
Top-left panel
(1)
Title: Ten-Year Sovereign Yields
Series: 10-Year U.K., U.S., Germany, and Japan sovereign yields
Horizon: April 1, 2011 - July 27, 2012
Description: Yields on highly-rated sovereign debt have continued their decline in recent weeks as concerns over the euro-area sovereign and banking crisis have reemerged, though some of these moves have somewhat retraced.
Source: Bloomberg
Top-right panel
(2)
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 June and August Federal Reserve Bank of New York Surveys of primary dealers
Horizon: H2 2012 to H2 2016 or later
Description: Dealer survey respondents place sizable odds on policy remaining on hold for a long period, with the distribution of expectations for the first federal funds target rate increase shifting out even further over the intermeeting period. Dealers now assign the highest probability of a first increase in the target rate to the second half of 2015.
Source: Federal Reserve Bank of New York Survey
Middle-left panel
(3)
Title: Probability of Additional Policy Actions Within One Year
Series: Federal Reserve Bank of New York Survey additional policy action responses by primary dealers, for June and August surveys
Horizon: 1 year
Description: The Desk's primary dealer survey shows that market participants see high probabilities of further policy steps over the coming year, and those probabilities have increased since the June meeting. In particular, the median respondent saw a 65 percent probability of an extension to the forward rate guidance beyond "late 2014," as well as a 65 percent probability of an increase in the size of the SOMA portfolio.
Source: Federal Reserve Bank of New York Survey
Middle-right panel
(4)
Title: Shorter-Term Interest Rates
Series: 2-year Treasury yield; 1-month OIS, 6 months forward
Horizon: July 1, 2011 - July 27, 2012
Description: The two-year Treasury yield and forward rates derived from overnight indexed swaps have moved down notably over the intermeeting period, and the Desk's market contacts attribute these moves primarily to the possibility of a reduction in the interest rate on excess reserves.
Source: Bloomberg, J.P. Morgan
Bottom-left panel
(5)
Title: MBS Option-Adjusted Spread to Treasury
Series: FNMA 30-year current coupon option-adjusted spread to Treasury
Horizon: April 1, 2011 - July 27, 2012
Description: MBS spreads to Treasuries narrowed over the intermeeting period, which many partially attributed to increased expectations for the announcement of an MBS purchase program.
Source: Barclays
Bottom-right panel
(6)
Title: Equity Prices
Series: S&P 500 Index, MSCI Emerging Market Index, Euro Stoxx Index
Horizon: April 1, 2011 - July 27, 2012
Description: Despite increasing concerns about global growth, stock markets were slightly higher over the period, supported in part by monetary policy easing and expectations for additional accommodation in both developed and emerging economies.
Source: Bloomberg
Exhibit 2
Top-left panel
(7)
Title: Euro Area Sovereign Debt Spreads
Series: Spanish and Italian 10-year spreads to Germany
Horizon: April 1, 2011 - July 27, 2012
Description: Spanish and Italian ten-year debt spreads to Germany rose to record or near-record levels during the period, though spreads narrowed sharply toward the end of the period in the wake of comments from ECB President Draghi about the possibility of ECB sovereign debt purchases.
Source: Bloomberg
Top-right panel
(8)
Title: Euro-Dollar Exchange Rate and Risk Reversals
Series: Spot euro-dollar exchange rate, 1-month 25-delta euro-dollar risk reversal
Horizon: April 1, 2011 - July 27, 2012
Description: Negative sentiment towards the euro area has put additional downward pressure on the exchange value of the euro against the dollar, though pricing in options markets does not suggest aggressive positioning for sharp moves lower in the exchange value of the euro against the dollar.
Source: Bloomberg
Middle-left panel
(9)
Title: EONIA Swap Curves
Series: EONIA swap curves on 07/04/12, 07/05/12, and 07/27/12
Horizon: 0 to 4 years to maturity
Description: EONIA swap rates decreased sharply over the period in response to the ECB's policy rate cut. The term structure of EONIA swap rates suggests expectations that accommodative policy is likely to remain in place for a considerable period.
Source: Bloomberg
Middle-right panel
(10)
Title: Two-Year Sovereign Yields
Series: 2-year France, Netherlands, Germany, Denmark, and Switzerland sovereign yields
Horizon: January 1, 2011 - July 27, 2012
Description: The ECB decision also led to notable declines in short-dated yields on European sovereign debt, and two-year yields are now negative for some countries.
Source: Bloomberg
Bottom-left panel
(11)
Title: 3-Month Sterling Libor-OIS
Series: 3-month Sterling Libor-OIS
Horizon: April 1, 2011 - July 27, 2012
Description: U.K. funding spreads have decreased since the Bank of England introduced its Funding for Lending Scheme.
BoE Meeting occurred on same day as ECB meeting.
Source: Bloomberg
Bottom-right panel
(12)
Title: Financial Equity Prices
Series: Euro Stoxx Bank Index; Equal-weighted average of publicly traded USD Libor panel banks as of 2008, ex-Barclays; Barclays
Horizon: May 1, 2012 - July 27, 2012
Description: Barclays' share price fell sharply following the announcement of its Libor-related settlement with U.K. and U.S. authorities. In the immediate aftermath of the announcement, shares of other banks that were in the USD Libor panel in 2008 underperformed the Euro Stoxx Bank Index amid speculation that the investigation into alleged wrongdoing could extend across a number of Libor panel banks.
Source: Bloomberg, Federal Reserve Bank of New York
Exhibit 3
Top-left panel
(13) MEP Operations (Through 07/27/12)
| Purchases | Sales | |
|---|---|---|
| Par Amount ($ Bil.) | 438.0 | 440.1* |
| Duration (Years) | 10.5 | 1.6 |
| 10-Year Equivalents ($ Bil.) | 555.6 | 83.5 |
| Number of Operations | 140 | 59 |
| Offer-to-Cover (Median) | 2.9 | 6.8 |
* There have also been $18.6 billion in redemptions to date. Return to table
Source: Federal Reserve Bank of New York
Top-right panel
(14)
Title: Median Monthly Coverage Ratios for MEP Purchase Operations
Series: Offer-to-cover and quality offer-to-cover* ratios for purchase operations under MEP
Horizon: October 2011 - July 2012
Description: Coverage ratios for MEP purchase operations have been declining, with commensurate declines in favorable-to-market (or "quality") propositions.
* Quality propositions are those classified in FRBNY's favorable-to-market bucket, which generally includes offers up to 3 to 6 ticks above market depending on sector. Return to text
Source: Federal Reserve Bank of New York
Middle-left panel
(15)
Title: Amount Accepted in MEP Purchase Operations by Seasoning
Series: Amount accepted in MEP purchase operations, separated between on-the-run, once off-the-run, twice off-the-run, thrice off-the-run, and seasoned issues, as a percent of total by month
Horizon: October 2011 - July 2012
Description: MEP purchases are gradually shifting toward more recently-issued securities over the course of the program, while earlier purchases were concentrated in seasoned securities.
Source: Federal Reserve Bank of New York
Middle-right panel
(16)
Title: Treasury Market Cost of Transacting
Series: 10-day moving average of price impact of simultaneously buying and selling $100 million of benchmark for 10-year and 2-year Treasuries
Horizon: April 1, 2010 - July 27, 2012
Description: Measures of the cost of transacting in Treasury securities remain within recent ranges, indicating that liquidity has held steady.
Source: Brokertec, Federal Reserve Bank of New York
Bottom-left panel
(17) Treasury and MBS Purchasable Room (Over Two-Year Horizon)
| ($ Billions) | Treasury | MBS |
|---|---|---|
| (a) Total Outstanding | 12,301 | 4,806 |
| (b) Total Ex-SOMA | 10,645 | 3,871 |
| (c) Excluded* | 8,004 | 2,582 |
| (d) Float Adjustment | 975 | 294 |
| Purchasable Room (b-c-d) | 1,666 | 995 |
* Includes structured and non-standard securities, low-duration securities, less-liquid securities, and FIMA holdings. Return to table
Source: Federal Reserve Bank of New York
Bottom-right panel
(18)
Title: Monthly Treasury and MBS Purchases (Par Amounts)
Series: Past monthly Treasury and MBS purchases, and projected purchases under a hypothetical two-year program under which the Federal Reserve would buy all purchasable Treasury and MBS securities as calculated in (17)
Horizon: January 1, 2009 - August 31, 2014
Description: Purchases of $2.6 trillion in securities over two years would imply a pace of about $110 billion per month in net new purchases, which is a pace never before sustained over such a long period.
Source: Federal Reserve Bank of New York
Exhibit 4
Top panel
(19) Treasury and MBS Purchases and Issuance (Monthly Pace Under Hypothetical 2-Year LSAP)
| ($ Billions) | Treasury* | MBS** | Total |
|---|---|---|---|
| Purchase Pace | 69 | 63 | 132 |
| Average Gross Issuance | 100 | 95 | 195 |
| Percent of Issuance | 69% | 66% | 68% |
* Excludes purchases under extended MEP. Return to table
** Includes $22 billion of monthly reinvestments. Return to table
Source: Federal Reserve Bank of New York
Middle-left panel
(20)
Title: Overnight Euro Area Repo Rates
Series: Overnight repo rates for Italian, Spanish, Belgian, French, Dutch, and German collateral
Horizon: June 6, 2012 - July 27, 2012
Description: Following the ECB's decision to cut its deposit facility rate to zero, rates on repos for German, Dutch, Belgian, and French collateral all dropped below zero. Repo rates against Spanish and Italian collateral also dropped to near zero.
Source: Federal Reserve Bank of New York
Middle-right panel
(21)
Title: Euro Portfolio Composition*
Series: SOMA euro portfolio holdings of reverse repos, outright sovereign securities, and official deposits
Horizon: July 6, 2012 and July 27, 2012
Description: Following the decline in euro area repo rates exhibited in (20), the Desk transferred funds from maturing reverse repos to official deposits, leading reverse repo holdings to decline to zero and increasing the amount of SOMA's deposits at official institutions. Some of those deposits are unremunerated. The amount of SOMA's outright holdings of German and French government debt stayed roughly flat.
* SOMA holdings only; does not include ESF. Return to text
Source: Federal Reserve Bank of New York
Appendix 3: Materials used by Mr. Wilcox
Material for
Forecast Summary
David Wilcox
July 31, 2012
Class II FOMC - Restricted (FR)
Forecast Summary
Confidence Intervals Based on Tealbook Track Record
Top-left panel
Real GDP
Percent change, annual rate
| Period | July TB | June TB | 70% confidence interval, lower bound | 70% confidence interval, upper bound |
|---|---|---|---|---|
| 2011:Q2 | 1.34 | ND | ND | ND |
| 2011:Q3 | 1.81 | 1.81 | ND | ND |
| 2011:Q4 | 2.95 | 2.95 | ND | ND |
| 2012:Q1 | 1.87 | 2.16 | 1.87 | 1.87 |
| 2012:Q2 | 0.95 | 1.46 | 0.78 | 1.12 |
| 2012:Q3 | 1.51 | 1.88 | 0.92 | 2.13 |
| 2012:Q4 | 1.76 | 1.91 | 0.90 | 2.70 |
| 2013:Q1 | 1.55 | 1.72 | 0.42 | 2.84 |
| 2013:Q2 | 2.05 | 2.06 | 0.73 | 3.62 |
| 2013:Q3 | 2.25 | 2.34 | 0.79 | 3.96 |
| 2013:Q4 | 2.55 | 2.48 | 1.05 | 4.35 |
| 2014:Q1 | 2.84 | 2.58 | 1.25 | 4.63 |
| 2014:Q2 | 3.04 | 2.85 | 1.34 | 4.76 |
| 2014:Q3 | 3.33 | 3.32 | 1.50 | 5.01 |
| 2014:Q4 | 3.51 | 3.53 | 1.52 | 5.12 |
Top-right panel
Unemployment Rate
Percent
| Period | July TB | June TB | 70% confidence interval, lower bound | 70% confidence interval, upper bound |
|---|---|---|---|---|
| 2011:Q2 | 9.10 | ND | ND | ND |
| 2011:Q3 | 9.10 | ND | ND | ND |
| 2011:Q4 | 8.70 | ND | ND | ND |
| 2012:Q1 | 8.20 | 8.24 | 8.20 | 8.20 |
| 2012:Q2 | 8.17 | 8.17 | 8.13 | 8.22 |
| 2012:Q3 | 8.25 | 8.18 | 8.08 | 8.41 |
| 2012:Q4 | 8.30 | 8.16 | 7.99 | 8.57 |
| 2013:Q1 | 8.19 | 8.11 | 7.74 | 8.60 |
| 2013:Q2 | 8.19 | 8.06 | 7.59 | 8.72 |
| 2013:Q3 | 8.15 | 8.01 | 7.40 | 8.79 |
| 2013:Q4 | 8.12 | 7.99 | 7.24 | 8.86 |
| 2014:Q1 | 8.07 | 8.00 | 7.09 | 8.91 |
| 2014:Q2 | 8.01 | 7.94 | 6.93 | 8.95 |
| 2014:Q3 | 7.93 | 7.84 | 6.78 | 8.97 |
| 2014:Q4 | 7.84 | 7.73 | 6.67 | 8.97 |
Middle-left panel
PCE Prices
Percent change, annual rate
| Period | July TB | June TB | 70% confidence interval, lower bound | 70% confidence interval, upper bound |
|---|---|---|---|---|
| 2011:Q2 | 3.30 | ND | ND | ND |
| 2011:Q3 | 2.34 | 2.34 | ND | ND |
| 2011:Q4 | 1.17 | 1.17 | ND | ND |
| 2012:Q1 | 2.55 | 2.38 | 2.55 | 2.55 |
| 2012:Q2 | 0.75 | 0.57 | 0.65 | 0.86 |
| 2012:Q3 | 0.78 | 0.15 | 0.42 | 1.16 |
| 2012:Q4 | 1.46 | 1.54 | 0.89 | 2.09 |
| 2013:Q1 | 1.57 | 1.62 | 0.83 | 2.37 |
| 2013:Q2 | 1.59 | 1.56 | 0.69 | 2.58 |
| 2013:Q3 | 1.47 | 1.51 | 0.51 | 2.48 |
| 2013:Q4 | 1.39 | 1.50 | 0.38 | 2.43 |
| 2014:Q1 | 1.35 | 1.52 | 0.28 | 2.47 |
| 2014:Q2 | 1.36 | 1.51 | 0.24 | 2.48 |
| 2014:Q3 | 1.36 | 1.50 | 0.24 | 2.48 |
| 2014:Q4 | 1.38 | 1.52 | 0.27 | 2.49 |
Middle-right panel
PCE Prices Excluding Food and Energy
Percent change, annual rate
| Period | July TB | June TB | 70% confidence interval, lower bound | 70% confidence interval, upper bound |
|---|---|---|---|---|
| 2011:Q2 | 2.26 | ND | ND | ND |
| 2011:Q3 | 2.06 | 2.06 | ND | ND |
| 2011:Q4 | 1.29 | 1.29 | ND | ND |
| 2012:Q1 | 2.32 | 2.11 | 2.32 | 2.32 |
| 2012:Q2 | 1.81 | 1.72 | 1.75 | 1.89 |
| 2012:Q3 | 1.60 | 1.56 | 1.36 | 1.85 |
| 2012:Q4 | 1.47 | 1.49 | 1.09 | 1.85 |
| 2013:Q1 | 1.57 | 1.58 | 1.05 | 2.08 |
| 2013:Q2 | 1.64 | 1.62 | 0.99 | 2.30 |
| 2013:Q3 | 1.61 | 1.62 | 0.88 | 2.34 |
| 2013:Q4 | 1.62 | 1.63 | 0.85 | 2.39 |
| 2014:Q1 | 1.60 | 1.64 | 0.79 | 2.40 |
| 2014:Q2 | 1.60 | 1.64 | 0.75 | 2.43 |
| 2014:Q3 | 1.60 | 1.64 | 0.72 | 2.43 |
| 2014:Q4 | 1.60 | 1.64 | 0.71 | 2.44 |
Bottom-left panel
Revisions: Real GDP
Four-quarter percent change
| Period | Current | July TB |
|---|---|---|
| 2008:Q4 | -3.32 | -3.32 |
| 2009:Q1 | -4.19 | -4.55 |
| 2009:Q2 | -4.58 | -5.03 |
| 2009:Q3 | -3.34 | -3.73 |
| 2009:Q4 | -0.08 | -0.54 |
| 2010:Q1 | 1.86 | 2.17 |
| 2010:Q2 | 2.51 | 3.30 |
| 2010:Q3 | 2.80 | 3.51 |
| 2010:Q4 | 2.39 | 3.14 |
| 2011:Q1 | 1.82 | 2.24 |
| 2011:Q2 | 1.88 | 1.63 |
| 2011:Q3 | 1.55 | 1.46 |
| 2011:Q4 | 1.97 | 1.61 |
| 2012:Q1 | 2.45 | 1.99 |
| 2012:Q2 | 2.21 | 1.90 |
Bottom-right panel
Personal Saving Rate
Percent of disposable personal income
| Period | Current | July TB |
|---|---|---|
| 2009:Q1 | 5.50 | 5.70 |
| 2009:Q2 | 5.80 | 6.20 |
| 2009:Q3 | 3.80 | 4.40 |
| 2009:Q4 | 3.80 | 4.30 |
| 2010:Q1 | 4.60 | 4.90 |
| 2010:Q2 | 5.60 | 5.60 |
| 2010:Q3 | 5.40 | 5.60 |
| 2010:Q4 | 4.80 | 5.20 |
| 2011:Q1 | 5.10 | 5.00 |
| 2011:Q2 | 4.60 | 4.80 |
| 2011:Q3 | 3.90 | 4.60 |
| 2011:Q4 | 3.40 | 4.20 |
| 2012:Q1 | 3.60 | 3.70 |
| 2012:Q2 | 4.00 | 4.09 |
Appendix 4: Materials used by Chairman Bernanke
Material for
The Consensus Forecast Exercise
July 31-August 1, 2012
Table 1. Proposal for a Consensus Forecast
| 2012 | 2012 | 2013 | 2014 | Longer run | ||
|---|---|---|---|---|---|---|
| H1 | H2 | |||||
| Real GDP | 1.7 | 2.0 | 1.8 | 2.5 | 3.2 | 2.5 |
| June SEP median | 1.9 | 2.2 | 2.0 | 2.6 | 3.2 | 2.5 |
| July Tealbook | 1.4 | 1.6 | 1.5 | 2.1 | 3.2 | 2.5 |
| Total PCE prices | 1.6 | 1.6 | 1.6 | 1.8 | 1.8 | 2.0 |
| June SEP median | 1.5 | 1.2 | 1.4 | 1.8 | 1.9 | 2.0 |
| July Tealbook | 1.7 | 1.1 | 1.4 | 1.5 | 1.4 | 2.0 |
| Core PCE prices | 2.0 | 1.7 | 1.8 | 1.8 | 1.8 | |
| June SEP median | 1.9 | 1.7 | 1.8 | 1.8 | 1.9 | |
| July Tealbook | 2.1 | 1.5 | 1.8 | 1.6 | 1.6 | |
| Unemployment rate1 | 8.2 | 8.2 | 8.2 | 7.9 | 7.6 | 5.5 |
| June SEP median | 8.2 | 8.0 | 8.1 | 7.8 | 7.4 | 5.5 |
| July Tealbook | 8.2 | 8.3 | 8.3 | 8.1 | 7.8 | 5.3 |
| Federal funds rate2 | 0.1 | 0.1 | 0.1 | 0.1 | 0.5 | 4.0 |
| June SEP median | 0.1 | 0.1 | 0.1 | 0.1 | 0.5 | 4.2 |
| July Tealbook | 0.1 | 0.1 | 0.1 | 0.1 | 0.5 | 4.3 |
1. Level in final quarter of period indicated. Return to table
2. Level at end of period indicated. Return to table
Table 2. Forecast Paths Under Alternative Monetary Policy Assumptions
| 2012 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | ||
|---|---|---|---|---|---|---|---|---|
| H1 | H2 | |||||||
| Real GDP growth | ||||||||
| Late-2014 liftoff | 1.7 | 2.0 | 1.8 | 2.5 | 3.2 | 3.4 | 3.4 | 3.3 |
| Mid-2015 liftoff | 2.2 | 1.9 | 2.7 | 3.3 | 3.5 | 3.2 | 3.1 | |
| Plus $1 trillion LSAP (Alternative A) | 2.2 | 1.9 | 2.9 | 3.4 | 3.5 | 3.2 | 3.0 | |
| Plus $1 trillion LSAP (greater duration) | 2.4 | 2.0 | 3.1 | 3.6 | 3.5 | 3.1 | 2.9 | |
| Unemployment rate (q4 level) | ||||||||
| Late-2014 liftoff | 8.2 | 8.2 | 8.2 | 7.9 | 7.6 | 7.0 | 6.4 | 5.9 |
| Mid-2015 liftoff | 8.2 | 8.2 | 7.8 | 7.4 | 6.8 | 6.2 | 5.8 | |
| Plus $1 trillion LSAP (Alternative A) | 8.2 | 8.2 | 7.7 | 7.2 | 6.6 | 6.0 | 5.7 | |
| Plus $1 trillion LSAP (greater duration) | 8.2 | 8.2 | 7.6 | 7.1 | 6.4 | 5.8 | 5.6 | |
| Headline PCE inflation | ||||||||
| Late-2014 liftoff | 1.6 | 1.6 | 1.6 | 1.8 | 1.8 | 1.9 | 2.0 | 2.0 |
| Mid-2015 liftoff | 1.7 | 1.6 | 1.8 | 1.9 | 2.0 | 2.0 | 2.0 | |
| Plus $1 trillion LSAP (Alternative A) | 1.8 | 1.7 | 1.9 | 1.9 | 2.1 | 2.1 | 2.1 | |
| Plus $1 trillion LSAP (greater duration) | 1.8 | 1.7 | 2.0 | 2.0 | 2.2 | 2.2 | 2.2 | |
| Core PCE inflation | ||||||||
| Late-2014 liftoff | 2.0 | 1.7 | 1.8 | 1.8 | 1.8 | 1.9 | 2.0 | 2.0 |
| Mid-2015 liftoff | 1.7 | 1.9 | 1.9 | 1.9 | 1.9 | 2.0 | 2.0 | |
| Plus $1 trillion LSAP (Alternative A) | 1.8 | 1.9 | 1.9 | 1.9 | 2.0 | 2.1 | 2.1 | |
| Plus $1 trillion LSAP (greater duration) | 1.9 | 2.0 | 2.0 | 2.0 | 2.1 | 2.2 | 2.1 | |
| Federal funds rate | ||||||||
| Late-2014 liftoff | .1 | .1 | .1 | .1 | .5 | 1.4 | 2.3 | 3.2 |
| Mid-2015 liftoff | .1 | .1 | .1 | .1 | .8 | 2.5 | 3.4 | |
| Plus $1 trillion LSAP (Alternative A) | .1 | .1 | .1 | .1 | .8 | 2.5 | 3.8 | |
| Plus $1 trillion LSAP (greater duration) | .1 | .1 | .1 | .1 | .8 | 2.5 | 4.0 | |
Alternative LSAP programs
- The "Alternative A" program involves purchasing $600 billion of Treasury securities and $400 billion of agency MBS by the end of the third quarter of 2013. The maturity distribution of the purchased securities is similar to that under the second LSAP program.
- The "greater duration" program involves purchasing $750 billion of Treasury securities and $250 billion of agency MBS by late 2013. The maturity distribution of the purchased Treasury securities is similar to that under the MEP (that is, longer than under the second LSAP program).
- Estimated term premium effects of the "greater duration" programs are approximately twice as large as those under the "alternative A" program.
Exhibit 1. Proposed Consensus Forecast
Top-left panel
1. Real GDP
4-quarter percent change
| Period | Proposed consensus forecast | June SEP central tendency, lower bound | June SEP central tendency, upper bound | 90% confidence band, lower bound | 90% confidence band, upper bound |
|---|---|---|---|---|---|
| 2012:Q1 | 2.06 | ||||
| 2012:Q2 | 2.04 | 2.04 | 2.04 | ||
| 2012:Q3 | 2.05 | 1.26 | 3.13 | ||
| 2012:Q4 | 1.84 | 1.9 | 2.4 | 0.42 | 3.29 |
| 2013:Q1 | 1.79 | -0.10 | 3.77 | ||
| 2013:Q2 | 2.09 | -0.19 | 4.50 | ||
| 2013:Q3 | 2.29 | -0.18 | 5.00 | ||
| 2013:Q4 | 2.50 | 2.2 | 2.8 | -0.20 | 5.32 |
| 2014:Q1 | 2.72 | -0.25 | 5.71 | ||
| 2014:Q2 | 2.87 | -0.25 | 5.92 | ||
| 2014:Q3 | 3.04 | -0.30 | 6.11 | ||
| 2014:Q4 | 3.18 | 3.0 | 3.5 | -0.36 | 6.16 |
Top-right panel
2. Unemployment Rate
percent
| Period | Proposed consensus forecast | June SEP central tendency, lower bound | June SEP central tendency, upper bound | 90% confidence band, lower bound | 90% confidence band, upper bound |
|---|---|---|---|---|---|
| 2012:Q1 | 8.20 | ||||
| 2012:Q2 | 8.17 | 8.17 | 8.17 | ||
| 2012:Q3 | 8.20 | 7.87 | 8.54 | ||
| 2012:Q4 | 8.19 | 8.0 | 8.2 | 7.59 | 8.80 |
| 2013:Q1 | 8.04 | 7.22 | 8.90 | ||
| 2013:Q2 | 8.02 | 7.01 | 9.10 | ||
| 2013:Q3 | 7.97 | 6.76 | 9.24 | ||
| 2013:Q4 | 7.92 | 7.5 | 8.0 | 6.57 | 9.38 |
| 2014:Q1 | 7.86 | 6.41 | 9.49 | ||
| 2014:Q2 | 7.79 | 6.23 | 9.61 | ||
| 2014:Q3 | 7.70 | 6.04 | 9.69 | ||
| 2014:Q4 | 7.59 | 7.0 | 7.7 | 5.94 | 9.75 |
Bottom-left panel
3. PCE Prices
4-quarter percent change
| Period | Proposed consensus forecast | June SEP central tendency, lower bound | June SEP central tendency, upper bound | 90% confidence band, lower bound | 90% confidence band, upper bound |
|---|---|---|---|---|---|
| 2012:Q1 | 2.33 | ||||
| 2012:Q2 | 1.67 | 1.67 | 1.67 | ||
| 2012:Q3 | 1.41 | 0.90 | 1.97 | ||
| 2012:Q4 | 1.60 | 1.2 | 1.7 | 0.70 | 2.61 |
| 2013:Q1 | 1.43 | 0.24 | 2.81 | ||
| 2013:Q2 | 1.74 | 0.29 | 3.43 | ||
| 2013:Q3 | 1.85 | 0.29 | 3.60 | ||
| 2013:Q4 | 1.79 | 1.5 | 2.0 | 0.18 | 3.59 |
| 2014:Q1 | 1.77 | 0.06 | 3.60 | ||
| 2014:Q2 | 1.75 | 0.02 | 3.58 | ||
| 2014:Q3 | 1.76 | -0.04 | 3.56 | ||
| 2014:Q4 | 1.80 | 1.5 | 2.0 | -0.10 | 3.64 |
Bottom-right panel
4. Core PCE Prices
4-quarter percent change
| Period | Proposed consensus forecast | June SEP central tendency, lower bound | June SEP central tendency, upper bound | 90% confidence band, lower bound | 90% confidence band, upper bound |
|---|---|---|---|---|---|
| 2012:Q1 | 1.99 | ||||
| 2012:Q2 | 1.85 | 1.85 | 1.85 | ||
| 2012:Q3 | 1.77 | 1.47 | 2.16 | ||
| 2012:Q4 | 1.85 | 1.7 | 2.0 | 1.33 | 2.54 |
| 2013:Q1 | 1.73 | 0.96 | 2.66 | ||
| 2013:Q2 | 1.75 | 0.76 | 2.95 | ||
| 2013:Q3 | 1.76 | 0.65 | 3.05 | ||
| 2013:Q4 | 1.81 | 1.6 | 2.0 | 0.59 | 3.14 |
| 2014:Q1 | 1.82 | 0.53 | 3.19 | ||
| 2014:Q2 | 1.81 | 0.47 | 3.19 | ||
| 2014:Q3 | 1.80 | 0.39 | 3.18 | ||
| 2014:Q4 | 1.80 | 1.6 | 2.0 | 0.38 | 3.19 |
Exhibit 2. Static Policy Rule Prescriptions
Top panel
Federal Funds Rate
percent
| Period | Path consistent with median June SEP submissions | Taylor 1999 | Inertial Taylor 1999 | Outcome-based rule |
|---|---|---|---|---|
| 2012:Q1 | 0.10 | 0.10 | 0.10 | 0.10 |
| 2012:Q2 | 0.15 | 0.15 | 0.15 | 0.15 |
| 2012:Q3 | 0.15 | 0.13 | 0.13 | 0.13 |
| 2012:Q4 | 0.12 | 0.13 | 0.13 | 0.13 |
| 2013:Q1 | 0.12 | 0.13 | 0.13 | 0.13 |
| 2013:Q2 | 0.12 | 0.13 | 0.13 | 0.13 |
| 2013:Q3 | 0.12 | 0.13 | 0.13 | 0.13 |
| 2013:Q4 | 0.12 | 0.13 | 0.13 | 0.13 |
| 2014:Q1 | 0.13 | 0.13 | 0.13 | 0.13 |
| 2014:Q2 | 0.13 | 0.13 | 0.13 | 0.16 |
| 2014:Q3 | 0.13 | 0.13 | 0.13 | 0.27 |
| 2014:Q4 | 0.50 | 0.13 | 0.13 | 0.43 |
| 2015:Q1 | 0.76 | 0.35 | 0.16 | 0.63 |
| 2015:Q2 | 0.98 | 0.60 | 0.23 | 0.84 |
| 2015:Q3 | 1.18 | 0.87 | 0.32 | 1.08 |
| 2015:Q4 | 1.40 | 1.14 | 0.45 | 1.32 |
| 2016:Q1 | 1.62 | 1.40 | 0.59 | 1.57 |
| 2016:Q2 | 1.85 | 1.65 | 0.75 | 1.82 |
| 2016:Q3 | 2.09 | 1.90 | 0.92 | 2.07 |
| 2016:Q4 | 2.32 | 2.14 | 1.10 | 2.31 |
| 2017:Q1 | 2.56 | 2.38 | 1.30 | 2.56 |
| 2017:Q2 | 2.79 | 2.62 | 1.49 | 2.79 |
| 2017:Q3 | 3.01 | 2.83 | 1.69 | 3.01 |
| 2017:Q4 | 3.19 | 3.01 | 1.89 | 3.19 |
| 2018:Q1 | 3.33 | 3.16 | 2.08 | 3.34 |
| 2018:Q2 | 3.45 | 3.28 | 2.26 | 3.45 |
| 2018:Q3 | 3.55 | 3.39 | 2.43 | 3.55 |
| 2018:Q4 | 3.63 | 3.48 | 2.59 | 3.63 |
Bottom-left panel
Projected Output Gap
| Period | Percent |
|---|---|
| 2012:Q1 | -4.35 |
| 2012:Q2 | -4.42 |
| 2012:Q3 | -4.54 |
| 2012:Q4 | -4.55 |
| 2013:Q1 | -4.55 |
| 2013:Q2 | -4.54 |
| 2013:Q3 | -4.42 |
| 2013:Q4 | -4.31 |
| 2014:Q1 | -4.19 |
| 2014:Q2 | -4.03 |
| 2014:Q3 | -3.82 |
| 2014:Q4 | -3.58 |
| 2015:Q1 | -3.36 |
| 2015:Q2 | -3.13 |
| 2015:Q3 | -2.91 |
| 2015:Q4 | -2.68 |
| 2016:Q1 | -2.46 |
| 2016:Q2 | -2.23 |
| 2016:Q3 | -2.01 |
| 2016:Q4 | -1.78 |
| 2017:Q1 | -1.56 |
| 2017:Q2 | -1.33 |
| 2017:Q3 | -1.13 |
| 2017:Q4 | -0.96 |
| 2018:Q1 | -0.82 |
| 2018:Q2 | -0.70 |
| 2018:Q3 | -0.59 |
| 2018:Q4 | -0.50 |
Bottom-right panel
Projected Core Inflation
| Period | Percent |
|---|---|
| 2012:Q1 | 1.99 |
| 2012:Q2 | 1.85 |
| 2012:Q3 | 1.77 |
| 2012:Q4 | 1.85 |
| 2013:Q1 | 1.73 |
| 2013:Q2 | 1.75 |
| 2013:Q3 | 1.76 |
| 2013:Q4 | 1.81 |
| 2014:Q1 | 1.82 |
| 2014:Q2 | 1.81 |
| 2014:Q3 | 1.80 |
| 2014:Q4 | 1.80 |
| 2015:Q1 | 1.81 |
| 2015:Q2 | 1.82 |
| 2015:Q3 | 1.85 |
| 2015:Q4 | 1.88 |
| 2016:Q1 | 1.90 |
| 2016:Q2 | 1.92 |
| 2016:Q3 | 1.94 |
| 2016:Q4 | 1.95 |
| 2017:Q1 | 1.96 |
| 2017:Q2 | 1.97 |
| 2017:Q3 | 1.97 |
| 2017:Q4 | 1.98 |
| 2018:Q1 | 1.98 |
| 2018:Q2 | 1.99 |
| 2018:Q3 | 1.99 |
| 2018:Q4 | 1.99 |
Note: Policy rule prescriptions conditioned on projections for the output gap and inflation without allowing for feedback. The projections for real activity and inflation assume that the onset of tightening begins in late 2014 (consistent with the median June SEP submission) and that the Committee does not undertake any additional expansion of its securities holdings.
Exhibit 3. Proposed Consensus Forecast Under Alternative Policy Assumptions Versus Optimal Control
Top panel
Federal Funds Rate
percent
| Period | Consensus forecast (late-2014 liftoff) | Consensus forecast (mid-2015 liftoff) | Consensus forecast (mid-2015 liftoff and "Alternative A" LSAP) | Consensus forecast (mid-2015 liftoff and "greater duration" LSAP) | Optimal control |
|---|---|---|---|---|---|
| 2012:Q1 | 0.10 | 0.10 | 0.10 | 0.10 | 0.10 |
| 2012:Q2 | 0.15 | 0.15 | 0.15 | 0.15 | 0.15 |
| 2012:Q3 | 0.15 | 0.13 | 0.13 | 0.13 | 0.16 |
| 2012:Q4 | 0.12 | 0.13 | 0.13 | 0.13 | 0.15 |
| 2013:Q1 | 0.12 | 0.13 | 0.13 | 0.13 | 0.14 |
| 2013:Q2 | 0.12 | 0.13 | 0.13 | 0.13 | 0.13 |
| 2013:Q3 | 0.12 | 0.13 | 0.13 | 0.13 | 0.12 |
| 2013:Q4 | 0.12 | 0.16 | 0.16 | 0.16 | 0.12 |
| 2014:Q1 | 0.13 | 0.13 | 0.13 | 0.13 | 0.12 |
| 2014:Q2 | 0.13 | 0.13 | 0.13 | 0.13 | 0.13 |
| 2014:Q3 | 0.13 | 0.13 | 0.13 | 0.13 | 0.14 |
| 2014:Q4 | 0.50 | 0.13 | 0.13 | 0.13 | 0.15 |
| 2015:Q1 | 0.76 | 0.14 | 0.14 | 0.14 | 0.17 |
| 2015:Q2 | 0.98 | 0.20 | 0.20 | 0.20 | 0.19 |
| 2015:Q3 | 1.18 | 0.42 | 0.42 | 0.42 | 0.22 |
| 2015:Q4 | 1.40 | 0.76 | 0.76 | 0.76 | 0.28 |
| 2016:Q1 | 1.62 | 1.21 | 1.21 | 1.21 | 0.46 |
| 2016:Q2 | 1.85 | 1.70 | 1.70 | 1.70 | 0.75 |
| 2016:Q3 | 2.09 | 2.16 | 2.16 | 2.16 | 1.09 |
| 2016:Q4 | 2.32 | 2.54 | 2.54 | 2.54 | 1.48 |
| 2017:Q1 | 2.56 | 2.84 | 2.93 | 3.01 | 1.89 |
| 2017:Q2 | 2.79 | 3.10 | 3.26 | 3.43 | 2.28 |
| 2017:Q3 | 3.01 | 3.29 | 3.52 | 3.75 | 2.66 |
| 2017:Q4 | 3.19 | 3.44 | 3.69 | 3.95 | 3.00 |
| 2018:Q1 | 3.33 | 3.54 | 3.79 | 4.05 | 3.30 |
| 2018:Q2 | 3.45 | 3.61 | 3.84 | 4.08 | 3.54 |
| 2018:Q3 | 3.55 | 3.66 | 3.85 | 4.06 | 3.74 |
| 2018:Q4 | 3.63 | 3.69 | 3.84 | 4.01 | 3.88 |
Bottom-left panel
Unemployment Rate
percent
| Period | Consensus forecast (late-2014 liftoff) | Consensus forecast (mid-2015 liftoff) | Consensus forecast (mid-2015 liftoff and "Alternative A" LSAP) | Consensus forecast (mid-2015 liftoff and "greater duration" LSAP) | Optimal control |
|---|---|---|---|---|---|
| 2012:Q1 | 8.20 | 8.20 | 8.20 | 8.20 | 8.20 |
| 2012:Q2 | 8.17 | 8.17 | 8.17 | 8.17 | 8.17 |
| 2012:Q3 | 8.20 | 8.20 | 8.20 | 8.20 | 8.20 |
| 2012:Q4 | 8.19 | 8.18 | 8.17 | 8.16 | 8.16 |
| 2013:Q1 | 8.04 | 8.02 | 7.99 | 7.96 | 7.97 |
| 2013:Q2 | 8.02 | 7.98 | 7.93 | 7.88 | 7.89 |
| 2013:Q3 | 7.97 | 7.91 | 7.83 | 7.75 | 7.76 |
| 2013:Q4 | 7.92 | 7.84 | 7.73 | 7.63 | 7.64 |
| 2014:Q1 | 7.86 | 7.77 | 7.63 | 7.50 | 7.50 |
| 2014:Q2 | 7.79 | 7.68 | 7.52 | 7.37 | 7.36 |
| 2014:Q3 | 7.70 | 7.56 | 7.39 | 7.22 | 7.19 |
| 2014:Q4 | 7.59 | 7.44 | 7.25 | 7.06 | 7.01 |
| 2015:Q1 | 7.44 | 7.27 | 7.07 | 6.87 | 6.79 |
| 2015:Q2 | 7.29 | 7.11 | 6.89 | 6.69 | 6.57 |
| 2015:Q3 | 7.14 | 6.94 | 6.72 | 6.51 | 6.36 |
| 2015:Q4 | 6.99 | 6.78 | 6.56 | 6.35 | 6.16 |
| 2016:Q1 | 6.84 | 6.63 | 6.41 | 6.20 | 5.97 |
| 2016:Q2 | 6.69 | 6.49 | 6.27 | 6.07 | 5.78 |
| 2016:Q3 | 6.54 | 6.35 | 6.14 | 5.95 | 5.62 |
| 2016:Q4 | 6.39 | 6.22 | 6.03 | 5.84 | 5.46 |
| 2017:Q1 | 6.24 | 6.09 | 5.91 | 5.74 | 5.33 |
| 2017:Q2 | 6.09 | 5.96 | 5.80 | 5.65 | 5.21 |
| 2017:Q3 | 6.00 | 5.90 | 5.76 | 5.62 | 5.16 |
| 2017:Q4 | 5.93 | 5.85 | 5.72 | 5.60 | 5.14 |
| 2018:Q1 | 5.86 | 5.80 | 5.70 | 5.60 | 5.15 |
| 2018:Q2 | 5.81 | 5.77 | 5.68 | 5.60 | 5.17 |
| 2018:Q3 | 5.76 | 5.73 | 5.67 | 5.60 | 5.21 |
| 2018:Q4 | 5.72 | 5.71 | 5.66 | 5.61 | 5.25 |
Bottom-right panel
PCE Prices
percent
| Period | Consensus forecast (late-2014 liftoff) | Consensus forecast (mid-2015 liftoff) | Consensus forecast (mid-2015 liftoff and "Alternative A" LSAP) | Consensus forecast (mid-2015 liftoff and "greater duration" LSAP) | Optimal control |
|---|---|---|---|---|---|
| 2012:Q1 | 2.33 | 2.33 | 2.33 | 2.33 | 2.33 |
| 2012:Q2 | 1.67 | 1.67 | 1.67 | 1.67 | 1.67 |
| 2012:Q3 | 1.41 | 1.43 | 1.45 | 1.48 | 1.52 |
| 2012:Q4 | 1.60 | 1.63 | 1.67 | 1.70 | 1.79 |
| 2013:Q1 | 1.43 | 1.48 | 1.53 | 1.58 | 1.72 |
| 2013:Q2 | 1.74 | 1.79 | 1.86 | 1.93 | 2.12 |
| 2013:Q3 | 1.85 | 1.90 | 1.97 | 2.03 | 2.23 |
| 2013:Q4 | 1.79 | 1.85 | 1.91 | 1.98 | 2.20 |
| 2014:Q1 | 1.77 | 1.83 | 1.90 | 1.97 | 2.19 |
| 2014:Q2 | 1.75 | 1.81 | 1.88 | 1.96 | 2.17 |
| 2014:Q3 | 1.76 | 1.82 | 1.89 | 1.97 | 2.18 |
| 2014:Q4 | 1.80 | 1.85 | 1.93 | 2.01 | 2.22 |
| 2015:Q1 | 1.84 | 1.89 | 1.97 | 2.06 | 2.25 |
| 2015:Q2 | 1.87 | 1.92 | 2.00 | 2.09 | 2.27 |
| 2015:Q3 | 1.90 | 1.96 | 2.04 | 2.13 | 2.30 |
| 2015:Q4 | 1.92 | 1.98 | 2.06 | 2.15 | 2.31 |
| 2016:Q1 | 1.94 | 2.00 | 2.08 | 2.17 | 2.32 |
| 2016:Q2 | 1.95 | 2.02 | 2.10 | 2.19 | 2.32 |
| 2016:Q3 | 1.96 | 2.03 | 2.11 | 2.20 | 2.32 |
| 2016:Q4 | 1.97 | 2.04 | 2.12 | 2.21 | 2.32 |
| 2017:Q1 | 1.97 | 2.05 | 2.13 | 2.21 | 2.31 |
| 2017:Q2 | 1.98 | 2.05 | 2.12 | 2.20 | 2.30 |
| 2017:Q3 | 1.98 | 2.04 | 2.12 | 2.19 | 2.29 |
| 2017:Q4 | 1.99 | 2.04 | 2.11 | 2.17 | 2.27 |
| 2018:Q1 | 1.99 | 2.03 | 2.09 | 2.15 | 2.25 |
| 2018:Q2 | 1.99 | 2.02 | 2.08 | 2.13 | 2.22 |
| 2018:Q3 | 1.99 | 2.02 | 2.06 | 2.10 | 2.19 |
| 2018:Q4 | 1.99 | 2.01 | 2.04 | 2.07 | 2.15 |
Appendix 5: Materials used by Vice Chairman Dudley
Top-left panel
Spain: 10-Year Bond Yield
Series: 10-year Spanish bond yield
Horizon: January 1, 2010 - July 24, 2012
Description: The yield on longer-term Spanish debt has steadily increased since the beginning of 2010, with a spike up in recent months.
Source: Bloomberg
Top-right panel
Euro Stoxx Bank Price Index
Series: Euro Stoxx Bank Index, indexed to 12/31/1991
Horizon: January 1, 2010 - July 24, 2012
Description: Euro area bank equity prices have steadily declined since early 2010, reaching a cyclical low in recent sessions.
Source: Bloomberg
Bottom-left panel
Euro Area Purchasing Managers Indexes
Series: Diffusion index, composite of manufacturing and services Euro Area Purchasing Managers Indexes, seasonally adjusted
Horizon: January 2010 - June 2012
Description: Euro area economic data has deteriorated since early 2010, with the composite Purchasing Managers Index showing sub-50 readings since early 2012.
Includes Germany, France, Spain, Italy, Ireland, Greece, Austria and Netherlands.
Source: Markit
Bottom-right panel
Italy and Spain: Nonresident Holdings of Public Debt Securities
Series: Nonresident percent of total holdings of public debt securities for Italy and Spain1
Horizon: January 2010 - April 2012
Description: Italian and Spanish public debt has become increasingly concentrated in the hands of domestic investors, as evidenced by steady declines in nonresident holdings of this debt since 2010.
1. Does not include subnational government securities Return to text
Source: Spanish Treasury, Bank of Italy
Appendix 6: Materials used by Mr. English
Material for
FOMC Briefing on Monetary Policy Alternatives
Bill English
August 1, 2012
Class I FOMC - Restricted Controlled (FR)
Experimental Consensus Forecast
Top-left panel
Federal Funds Rate
Percent
| Period | Late-2014 liftoff | Mid-2015 liftoff and Alternative A LSAP |
|---|---|---|
| 2012:Q1 | 0.10 | 0.10 |
| 2012:Q2 | 0.15 | 0.15 |
| 2012:Q3 | 0.15 | 0.13 |
| 2012:Q4 | 0.13 | 0.13 |
| 2013:Q1 | 0.13 | 0.13 |
| 2013:Q2 | 0.13 | 0.13 |
| 2013:Q3 | 0.13 | 0.13 |
| 2013:Q4 | 0.13 | 0.13 |
| 2014:Q1 | 0.13 | 0.13 |
| 2014:Q2 | 0.13 | 0.13 |
| 2014:Q3 | 0.13 | 0.13 |
| 2014:Q4 | 0.50 | 0.13 |
| 2015:Q1 | 0.76 | 0.14 |
| 2015:Q2 | 0.98 | 0.20 |
| 2015:Q3 | 1.18 | 0.42 |
| 2015:Q4 | 1.40 | 0.76 |
| 2016:Q1 | 1.62 | 1.21 |
| 2016:Q2 | 1.85 | 1.70 |
| 2016:Q3 | 2.09 | 2.16 |
| 2016:Q4 | 2.32 | 2.54 |
| 2017:Q1 | 2.56 | 2.93 |
| 2017:Q2 | 2.79 | 3.26 |
| 2017:Q3 | 3.01 | 3.52 |
| 2017:Q4 | 3.19 | 3.69 |
| 2018:Q1 | 3.33 | 3.79 |
| 2018:Q2 | 3.45 | 3.84 |
| 2018:Q3 | 3.55 | 3.85 |
| 2018:Q4 | 3.63 | 3.84 |
| 2019:Q1 | 3.69 | 3.82 |
| 2019:Q2 | 3.74 | 3.80 |
| 2019:Q3 | 3.78 | 3.77 |
| 2019:Q4 | 3.81 | 3.75 |
| 2020:Q1 | 3.84 | 3.74 |
| 2020:Q2 | 3.86 | 3.72 |
| 2020:Q3 | 3.89 | 3.72 |
| 2020:Q4 | 3.90 | 3.71 |
Top-right panel
Total Federal Reserve Assets
$ billion
| Period | Late-2014 liftoff | Mid-2015 liftoff and Alternative A LSAP |
|---|---|---|
| January 2006 | 838.22 | 838.22 |
| February 2006 | 846.57 | 846.57 |
| March 2006 | 842.70 | 842.70 |
| April 2006 | 843.45 | 843.45 |
| May 2006 | 854.89 | 854.89 |
| June 2006 | 855.24 | 855.24 |
| July 2006 | 853.15 | 853.15 |
| August 2006 | 852.79 | 852.79 |
| September 2006 | 847.52 | 847.52 |
| October 2006 | 861.19 | 861.19 |
| November 2006 | 864.68 | 864.68 |
| December 2006 | 877.14 | 877.14 |
| January 2007 | 869.56 | 869.56 |
| February 2007 | 881.27 | 881.27 |
| March 2007 | 870.55 | 870.55 |
| April 2007 | 895.78 | 895.78 |
| May 2007 | 882.78 | 882.78 |
| June 2007 | 872.45 | 872.45 |
| July 2007 | 880.30 | 880.30 |
| August 2007 | 874.48 | 874.48 |
| September 2007 | 882.08 | 882.08 |
| October 2007 | 886.93 | 886.93 |
| November 2007 | 883.73 | 883.73 |
| December 2007 | 917.93 | 917.93 |
| January 2008 | 882.22 | 882.22 |
| February 2008 | 893.07 | 893.07 |
| March 2008 | 899.34 | 899.34 |
| April 2008 | 889.70 | 889.70 |
| May 2008 | 894.72 | 894.72 |
| June 2008 | 919.19 | 919.19 |
| July 2008 | 915.71 | 915.71 |
| August 2008 | 913.23 | 913.23 |
| September 2008 | 1510.71 | 1510.71 |
| October 2008 | 2082.32 | 2082.32 |
| November 2008 | 2138.98 | 2138.98 |
| December 2008 | 2240.95 | 2240.95 |
| January 2009 | 1862.76 | 1862.76 |
| February 2009 | 1911.31 | 1911.31 |
| March 2009 | 2088.41 | 2088.41 |
| April 2009 | 2047.12 | 2047.12 |
| May 2009 | 2083.71 | 2083.71 |
| June 2009 | 1998.47 | 1998.47 |
| July 2009 | 1996.03 | 1996.03 |
| August 2009 | 2081.33 | 2081.33 |
| September 2009 | 2144.16 | 2144.16 |
| October 2009 | 2169.98 | 2169.98 |
| November 2009 | 2206.83 | 2206.83 |
| December 2009 | 2237.14 | 2237.14 |
| January 2010 | 2251.80 | 2251.80 |
| February 2010 | 2283.98 | 2283.98 |
| March 2010 | 2310.54 | 2310.54 |
| April 2010 | 2334.03 | 2334.03 |
| May 2010 | 2340.15 | 2340.15 |
| June 2010 | 2334.30 | 2334.30 |
| July 2010 | 2329.37 | 2329.37 |
| August 2010 | 2307.91 | 2307.91 |
| September 2010 | 2300.45 | 2300.45 |
| October 2010 | 2300.88 | 2300.88 |
| November 2010 | 2342.33 | 2342.33 |
| December 2010 | 2428.42 | 2428.42 |
| January 2011 | 2461.86 | 2461.86 |
| February 2011 | 2540.19 | 2540.19 |
| March 2011 | 2633.18 | 2633.18 |
| April 2011 | 2701.99 | 2701.99 |
| May 2011 | 2790.76 | 2790.76 |
| June 2011 | 2870.76 | 2870.76 |
| July 2011 | 2868.61 | 2868.61 |
| August 2011 | 2857.40 | 2857.40 |
| September 2011 | 2853.17 | 2853.17 |
| October 2011 | 2833.18 | 2833.18 |
| November 2011 | 2816.78 | 2816.78 |
| December 2011 | 2920.65 | 2920.65 |
| January 2012 | 2923.72 | 2923.72 |
| February 2012 | 2928.05 | 2928.05 |
| March 2012 | 2859.00 | 2859.00 |
| April 2012 | 2859.00 | 2859.00 |
| May 2012 | 2849.06 | 2849.06 |
| June 2012 | 2862.42 | 2862.42 |
| July 2012 | 2845.08 | 2848.13 |
| August 2012 | 2838.38 | 2879.85 |
| September 2012 | 2831.08 | 2923.92 |
| October 2012 | 2833.04 | 2992.94 |
| November 2012 | 2836.33 | 3067.51 |
| December 2012 | 2841.24 | 3143.85 |
| January 2013 | 2842.87 | 3220.99 |
| February 2013 | 2845.05 | 3298.47 |
| March 2013 | 2847.43 | 3375.90 |
| April 2013 | 2849.54 | 3452.39 |
| May 2013 | 2851.32 | 3528.48 |
| June 2013 | 2852.72 | 3604.18 |
| July 2013 | 2854.26 | 3678.94 |
| August 2013 | 2855.82 | 3753.43 |
| September 2013 | 2857.45 | 3827.84 |
| October 2013 | 2859.08 | 3857.91 |
| November 2013 | 2860.04 | 3874.76 |
| December 2013 | 2860.30 | 3877.88 |
| January 2014 | 2860.04 | 3877.70 |
| February 2014 | 2859.34 | 3877.05 |
| March 2014 | 2858.34 | 3875.99 |
| April 2014 | 2857.32 | 3874.57 |
| May 2014 | 2856.38 | 3872.96 |
| June 2014 | 2855.48 | 3871.51 |
| July 2014 | 2849.51 | 3870.05 |
| August 2014 | 2838.44 | 3868.48 |
| September 2014 | 2826.28 | 3866.75 |
| October 2014 | 2814.18 | 3864.86 |
| November 2014 | 2802.15 | 3862.90 |
| December 2014 | 2790.26 | 3856.22 |
| January 2015 | 2779.55 | 3844.81 |
| February 2015 | 2768.92 | 3817.07 |
| March 2015 | 2758.33 | 3795.60 |
| April 2015 | 2747.80 | 3765.38 |
| May 2015 | 2737.34 | 3728.02 |
| June 2015 | 2721.09 | 3694.14 |
| July 2015 | 2704.83 | 3664.50 |
| August 2015 | 2688.59 | 3628.73 |
| September 2015 | 2672.33 | 3605.53 |
| October 2015 | 2656.07 | 3582.53 |
| November 2015 | 2640.56 | 3528.33 |
| December 2015 | 2624.30 | 3499.83 |
| January 2016 | 2600.89 | 3463.50 |
| February 2016 | 2547.22 | 3389.38 |
| March 2016 | 2506.60 | 3331.55 |
| April 2016 | 2461.83 | 3270.02 |
| May 2016 | 2405.56 | 3199.20 |
| June 2016 | 2375.00 | 3155.74 |
| July 2016 | 2347.77 | 3114.68 |
| August 2016 | 2317.47 | 3070.41 |
| September 2016 | 2293.68 | 3033.72 |
| October 2016 | 2270.20 | 2996.78 |
| November 2016 | 2229.14 | 2941.16 |
| December 2016 | 2200.53 | 2898.81 |
| January 2017 | 2174.72 | 2858.62 |
| February 2017 | 2139.74 | 2802.89 |
| March 2017 | 2112.09 | 2756.53 |
| April 2017 | 2082.64 | 2712.10 |
| May 2017 | 2035.55 | 2651.07 |
| June 2017 | 2008.82 | 2611.59 |
| July 2017 | 1984.67 | 2574.06 |
| August 2017 | 1948.25 | 2522.14 |
| September 2017 | 1927.30 | 2488.29 |
| October 2017 | 1908.94 | 2456.85 |
| November 2017 | 1875.62 | 2410.29 |
| December 2017 | 1846.08 | 2368.19 |
| January 2018 | 1814.66 | 2324.19 |
| February 2018 | 1768.85 | 2258.27 |
| March 2018 | 1738.89 | 2209.31 |
| April 2018 | 1734.52 | 2162.11 |
| May 2018 | 1742.14 | 2090.95 |
| June 2018 | 1749.78 | 2048.08 |
| July 2018 | 1757.44 | 2000.66 |
| August 2018 | 1765.14 | 1941.55 |
| September 2018 | 1772.86 | 1906.78 |
| October 2018 | 1780.60 | 1862.26 |
| November 2018 | 1788.37 | 1791.57 |
| December 2018 | 1796.17 | 1797.97 |
| January 2019 | 1804.06 | 1805.86 |
| February 2019 | 1811.98 | 1813.77 |
| March 2019 | 1819.93 | 1821.70 |
| April 2019 | 1827.90 | 1829.66 |
| May 2019 | 1835.89 | 1837.64 |
| June 2019 | 1843.91 | 1845.65 |
| July 2019 | 1851.95 | 1853.68 |
| August 2019 | 1860.02 | 1861.74 |
| September 2019 | 1868.12 | 1869.82 |
| October 2019 | 1876.24 | 1877.93 |
| November 2019 | 1884.38 | 1886.06 |
| December 2019 | 1892.55 | 1894.22 |
| January 2020 | 1900.81 | 1902.46 |
| February 2020 | 1909.09 | 1910.73 |
| March 2020 | 1917.39 | 1919.02 |
| April 2020 | 1925.71 | 1927.34 |
| May 2020 | 1934.07 | 1935.68 |
| June 2020 | 1942.45 | 1944.04 |
| July 2020 | 1950.86 | 1952.43 |
| August 2020 | 1959.29 | 1960.84 |
| September 2020 | 1967.75 | 1969.28 |
| October 2020 | 1976.23 | 1977.74 |
| November 2020 | 1984.73 | 1986.23 |
| December 2020 | 1993.26 | 1994.75 |
Note: Balance sheet projections correspond to Alternatives A and B in Tealbook B.
Bottom-left panel
Unemployment Rate
Percent
| Period | Late-2014 liftoff | Mid-2015 liftoff and Alternative A LSAP |
|---|---|---|
| 2012:Q1 | 8.20 | 8.20 |
| 2012:Q2 | 8.17 | 8.17 |
| 2012:Q3 | 8.20 | 8.20 |
| 2012:Q4 | 8.19 | 8.17 |
| 2013:Q1 | 8.04 | 7.99 |
| 2013:Q2 | 8.02 | 7.93 |
| 2013:Q3 | 7.97 | 7.83 |
| 2013:Q4 | 7.92 | 7.73 |
| 2014:Q1 | 7.86 | 7.63 |
| 2014:Q2 | 7.79 | 7.52 |
| 2014:Q3 | 7.70 | 7.39 |
| 2014:Q4 | 7.59 | 7.25 |
| 2015:Q1 | 7.44 | 7.07 |
| 2015:Q2 | 7.29 | 6.89 |
| 2015:Q3 | 7.14 | 6.72 |
| 2015:Q4 | 6.99 | 6.56 |
| 2016:Q1 | 6.84 | 6.41 |
| 2016:Q2 | 6.69 | 6.27 |
| 2016:Q3 | 6.54 | 6.14 |
| 2016:Q4 | 6.39 | 6.03 |
| 2017:Q1 | 6.24 | 5.91 |
| 2017:Q2 | 6.09 | 5.80 |
| 2017:Q3 | 6.00 | 5.76 |
| 2017:Q4 | 5.93 | 5.72 |
| 2018:Q1 | 5.86 | 5.70 |
| 2018:Q2 | 5.81 | 5.68 |
| 2018:Q3 | 5.76 | 5.67 |
| 2018:Q4 | 5.72 | 5.66 |
| 2019:Q1 | 5.69 | 5.65 |
| 2019:Q2 | 5.66 | 5.65 |
| 2019:Q3 | 5.64 | 5.64 |
| 2019:Q4 | 5.62 | 5.63 |
| 2020:Q1 | 5.60 | 5.62 |
| 2020:Q2 | 5.58 | 5.62 |
| 2020:Q3 | 5.57 | 5.61 |
| 2020:Q4 | 5.56 | 5.60 |
Bottom-right panel
PCE Inflation
Four-quarter average
Percent
| Period | Late-2014 liftoff | Mid-2015 liftoff and Alternative A LSAP |
|---|---|---|
| 2012:Q1 | 2.33 | 2.33 |
| 2012:Q2 | 1.67 | 1.67 |
| 2012:Q3 | 1.41 | 1.45 |
| 2012:Q4 | 1.60 | 1.67 |
| 2013:Q1 | 1.43 | 1.53 |
| 2013:Q2 | 1.74 | 1.86 |
| 2013:Q3 | 1.85 | 1.97 |
| 2013:Q4 | 1.79 | 1.91 |
| 2014:Q1 | 1.77 | 1.90 |
| 2014:Q2 | 1.75 | 1.88 |
| 2014:Q3 | 1.76 | 1.89 |
| 2014:Q4 | 1.80 | 1.93 |
| 2015:Q1 | 1.84 | 1.97 |
| 2015:Q2 | 1.87 | 2.00 |
| 2015:Q3 | 1.90 | 2.04 |
| 2015:Q4 | 1.92 | 2.06 |
| 2016:Q1 | 1.94 | 2.08 |
| 2016:Q2 | 1.95 | 2.10 |
| 2016:Q3 | 1.96 | 2.11 |
| 2016:Q4 | 1.97 | 2.12 |
| 2017:Q1 | 1.97 | 2.13 |
| 2017:Q2 | 1.98 | 2.12 |
| 2017:Q3 | 1.98 | 2.12 |
| 2017:Q4 | 1.99 | 2.11 |
| 2018:Q1 | 1.99 | 2.09 |
| 2018:Q2 | 1.99 | 2.08 |
| 2018:Q3 | 1.99 | 2.06 |
| 2018:Q4 | 1.99 | 2.04 |
| 2019:Q1 | 2.00 | 2.02 |
| 2019:Q2 | 2.00 | 2.00 |
| 2019:Q3 | 2.00 | 1.98 |
| 2019:Q4 | 2.00 | 1.97 |
| 2020:Q1 | 2.00 | 1.96 |
| 2020:Q2 | 2.00 | 1.94 |
| 2020:Q3 | 2.00 | 1.93 |
| 2020:Q4 | 2.00 | 1.93 |
June FOMC Statement
- 1. Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and 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 economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term 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 through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
[Note: In the August 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.]
August FOMC Statement--Alternative A
- 1. Information received since the Federal Open Market Committee met in April June suggests that the economy has been expanding moderately economic activity decelerated somewhat over the first half of this year. However, Growth in employment has slowed been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be has been rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined been subdued in recent months, mainly reflecting lower prices of crude oil and gasoline, and 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 economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets [ continue to | and issues relating to U.S. fiscal policy ] pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term 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 also decided to
continue through the end of the year its program to extend the average maturity of its
holdings of securities begin a new large-scale asset purchase program.
Specifically, the Committee now intends to purchase Treasury securities with
remaining maturities of 6 years to 30 years at the current pace and to sell or redeem
an equal amount of Treasury securities with remaining maturities of approximately 3
years or less increase its holdings of longer-term Treasury securities at a pace of
about [ $45 ] billion per month and of agency mortgage-backed securities at a
pace of about [ $30 ] billion per month. The Committee anticipates continuing to
add to its holdings at least until it observes sustained improvement in labor
market conditions, as long as projected medium-term inflation is close to its
mandate-consistent level and longer-term inflation expectations remain stable.
This continuation of the maturity extension program The increase in the
Committee's securities holdings should put downward pressure on longer-term
interest rates, support mortgage markets, and help to make broader financial
conditions more accommodative. This new purchase program replaces the
previously announced maturity extension program; therefore, the Committee is
ending its sales of shorter-term Treasury securities and reinstituting its policy of
rolling over maturing Treasury securities at auction. The Committee is
maintaining its existing policy of reinvesting principal payments from its holdings of
agency debt and agency mortgage-backed securities in agency mortgage-backed
securities. The Committee will regularly review the pace and composition of its
securities purchases in light of the economic outlook and its ongoing assessments
of the efficacy and costs of the program, and is prepared to take further action
make adjustments as appropriate to promote a stronger economic recovery and
sustained improvement in labor market conditions in a context of price stability.
OR - 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 also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities begin a new large-scale asset purchase program. Specifically, the Committee now intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less [ $600 billion ] of longer-term Treasury securities and [ $400 billion ] of agency mortgage-backed securities by the end of the third quarter of 2013, a combined pace of about [ $75 ] billion a month. This continuation of the maturity extension program This action should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. This new purchase program replaces the previously announced maturity extension program; therefore, the Committee is ending its sales of shorter-term Treasury securities and reinstituting its policy of rolling over maturing Treasury securities at auction. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee will regularly review the size and composition of its balance sheet in light of the outlook for inflation and labor market conditions and is prepared to take further action make adjustments as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
- 4. The Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and. To support sustained improvement in labor market conditions and to help ensure that inflation is close to its mandate-consistent level over the medium run, the Committee expects to maintain a highly accommodative stance for monetary policy as the economic recovery strengthens. In particular, the Committee 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 are likely to be warranted at least through late 2014 mid-2015.
Note: If policymakers decide that it is appropriate to reduce the remuneration rate on reserve balances, the Board of Governors would issue an accompanying statement that might read:
In a related action, the Board of Governors voted today to reduce the interest rate paid on required and excess reserve balances from 25 basis points to 15 basis points effective with the reserve maintenance period that begins on August 9, 2012.
August FOMC Statement--Alternative B
- 1. Information received since the Federal Open Market Committee met in April June suggests that the economy has been expanding moderately economic activity decelerated somewhat over the first half of this year. However, Growth in employment has slowed been slow in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed. Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and 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 economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets [ continue to | and issues relating to U.S. fiscal policy ] pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term 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 | mid-2015 ].
- 4. The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
August FOMC Statement--Alternative C
- 1. Information received since the Federal Open Market Committee met in April June suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Employment has shown further gains. Business fixed investment Private domestic demand has continued to advance, Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite and the housing sector remains depressed has shown some signs of improvement. Inflation has declined since earlier this year, mainly reflecting lower prices of crude oil and gasoline, and 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 economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets [ continue to | and issues relating to U.S. fiscal policy ] pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below about the rate that it judges most consistent with its dual mandate.
- 3. To support a stronger the 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 [ 2013 | 2014 ].
OR - 3′. 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. As rates of resource utilization rise toward levels consistent with maximum employment, the Committee eventually will need to make monetary policy less accommodative in order to ensure that the economy expands at a sustainable pace and to prevent inflation from persistently exceeding its longer-run objective. In determining the appropriate time to increase its target for the federal funds rate, the Committee will consider a range of factors, including actual and projected labor market conditions, the medium-term outlook for inflation, and the risks to the achievement of the Committee's objectives.
- 4. The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining and to maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee will regularly review the size and composition of its securities holdings and is prepared to take further action as appropriate adjust those holdings as necessary to promote maximum employment and a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
June 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 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. Following the conclusion of these purchases, the Committee directs the Desk to purchase Treasury securities with remaining maturities of 6 years to 30 years with a total face value of about $267 billion by the end of December 2012, and to sell or redeem Treasury securities with remaining maturities of approximately 3 years or less with a total face value of about $267 billion. For the duration of this program, the Committee directs the Desk to suspend its current policy of rolling over maturing Treasury securities into new issues. The Committee directs the Desk to maintain its existing policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities. These actions should 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 August 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.]
August 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 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. Following the conclusion of these purchases, the Committee directs the Desk to purchase Treasury securities with remaining maturities of 6 years to 30 years with a total face value of about $267 billion by the end of December 2012, and to sell or redeem Treasury securities with remaining maturities of approximately 3 years or less with a total face value of about $267 billion begin a new large-scale asset purchase program. This program replaces the previously announced maturity extension program. Specifically, [ the Desk is directed to purchase longer-term Treasury securities at a pace of about $45 billion per month and to purchase agency mortgage-backed securities at a pace of about $30 billion per month. | the Desk is directed to purchase $600 billion of longer-term Treasury securities and $400 billion of agency mortgage-backed securities by the end of the third quarter of 2013. ] For the duration of this program, the Committee directs the Desk to suspend its current The desk is also directed to reinstate the policy of rolling over maturing Treasury securities into new issues. The Committee directs the Desk to maintain its existing policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities. These actions should 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.
August 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 announced in June September to purchase, by the end of June 2012, Treasury securities with remaining maturities of 6 years to 30 years with a total face value of $400 billion, and to sell or redeem Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. Following the conclusion of these purchases, the Committee directs the Desk to purchase Treasury securities with remaining maturities of 6 years to 30 years with a total face value of about $267 billion by the end of December 2012, and to sell or redeem Treasury securities with remaining maturities of approximately 3 years or less with a total face value of about $267 billion. For the duration of this program, the Committee directs the Desk to suspend its current policy of rolling over maturing Treasury securities into new issues. The Committee directs the Desk to maintain its existing policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities. These actions should 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.
August 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 announced in June September to purchase, by the end of June 2012, Treasury securities with remaining maturities of 6 years to 30 years with a total face value of $400 billion, and to sell or redeem Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. Following the conclusion of these purchases, the Committee directs the Desk to purchase Treasury securities with remaining maturities of 6 years to 30 years with a total face value of about $267 billion by the end of December 2012, and to sell or redeem Treasury securities with remaining maturities of approximately 3 years or less with a total face value of about $267 billion. For the duration of this program, the Committee directs the Desk to suspend its current policy of rolling over maturing Treasury securities into new issues. The Committee directs the Desk to maintain its existing policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities. These actions should 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.
Appendix 7: Materials used by Ms. Yellen
Questions regarding
Experimental Forecast Exercise
August 1, 2012
Class I FOMC - Restricted Controlled (FR)
Questions
- Do you think the general approach used in this exercise would be helpful in elucidating a forecast that appropriately captures the consensus view of the Committee? What elements would you suggest be modified in future experiments?
- Should the Committee proceed with a second experiment? If so, do you have any specific suggestions regarding the design of that experiment and when it should take place?
- If the Committee proceeds with a second experiment, to what extent should participants be expected to provide input to the Chairman in advance of his initial preparation of the consensus forecast? Should a compilation of participants' initial input to the Chairman be circulated to all Committee participants; if so, should it be with or without attribution?