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Figure 1. Median of Individual FOMC Participants' June 2016 Federal Funds Rate Projections
| Period | Median federal funds rate forecast |
Lower 70% confidence bound |
Upper 70% confidence bound |
|---|---|---|---|
| 2015:Q1 | 0.11 | ND (no data) | ND |
| 2015:Q2 | 0.12 | ND | ND |
| 2015:Q3 | 0.14 | ND | ND |
| 2015:Q4 | 0.16 | ND | ND |
| 2016:Q1 | 0.36 | ND | ND |
| 2016:Q2 | 0.38 | ND | ND |
| 2016:Q3 | 0.63 | 0.50 | 0.76 |
| 2016:Q4 | 0.88 | 0.35 | 1.41 |
| 2017:Q1 | 1.05 | 0.35 | 1.75 |
| 2017:Q2 | 1.23 | 0.32 | 2.14 |
| 2017:Q3 | 1.40 | 0.13 | 2.80 |
| 2017:Q4 | 1.58 | 0.13 | 3.13 |
| 2018:Q1 | 1.78 | 0.13 | 3.51 |
| 2018:Q2 | 1.98 | 0.13 | 3.85 |
| 2018:Q3 | 2.18 | 0.20 | 4.16 |
| 2018:Q4 | 2.38 | 0.16 | 4.60 |
Note: Confidence interval equals the median of the end-of-year funds rate paths projected by individual FOMC participants (interpolated quarterly), plus or minus the average root mean squared prediction errors for 0 to 9 quarters ahead made by private and government forecasters during the past 20 years, subject to an effective lower bound of 12.5 basis points.
Source: June 2016 Summary of Economic Projections, Federal Reserve Board staff.
Conventional Monetary Easing during Past Recessions and Accompanying Economic Conditions
| National Bureau of Economic Research Recession Dates | Total Amount of Conventional Monetary Easing (percent)1 | Estimated Stance of Monetary Policy at the Start of Easing (percent)2 | Peak Rate of 12-Month Core PCE Inflation during the Recession (percent) |
Labor Utilization at the Start of the Recession3 (percent) |
|---|---|---|---|---|
| August 1957 to April 1958 | 2.9 | -- | 3.24 | -1.3 |
| April 1960 to February 1961 | 2.8 | -- | 2.1 | -0.3 |
| December 1969 to November 1970 | 5.5 | 0.5 | 4.8 | -2.4 |
| November 1973 to March 1975 | 7.7 | 3 | 10.2 | -1.4 |
| January 1980 to July 1980 | 4.8 | 3.2 | 9.1 | -0.2 |
| July 1981 to November 1982 | 10.4 | 7.1 | 8.8 | 1 |
| July 1990 to March 1991 | 5.3 | 1.7 | 4.3 | -0.4 |
| March 2001 to November 2001 | 4.8 | 1.9 | 2 | -0.8 |
| December 2007 to June 2009 | 5.1 | 1.9 | 2.3 | 0.1 |
Note: 1. For recessions prior to 1990, the total amount of easing is the difference between the maximum and the minimum monthly average of the effective federal funds rate in a period extending from six months prior to the start of the recession to six months after it ends. For the last three recessions, the periods of continuous reductions in the intended federal funds rate are June 1990 to September 1992, December 2000 to January 2002, and August 2007 to December 2008. 2. Difference between the federal funds rate (less the 12-month percent change in the core personal consumption expenditures (PCE) price index) and its real equilibrium value (R*) as estimated by Laubach and Williams (2007). Figures in table are computed using updated R* estimates from the Laubach-Williams model, available at www.frbsf.org/economic-research/economists/john-williams. 3. Civilian unemployment rate less Congressional Budget Office estimate of the long-run natural rate of unemployment. 4. Four-quarter percent change in the overall chain-weighted PCE price index.
Source: David Reifschneider (2016), "Gauging the Ability of the FOMC to Respond to Future Recessions (PDF)," Finance and Economics Discussion Series 2016-068 (Washington: Board of Governors of the Federal Reserve System, August).
Figure 2. Using Lower-for-Longer Forward Guidance and $2 Trillion in Asset Purchases to Compensate for a Limited Ability to Reduce the Federal Funds Rate during a Recession
| Quarter of Year X |
Constrained policy rule |
Unconstrained policy rule |
Constrained policy rule with forward guidance and asset purchases |
|---|---|---|---|
| 0:Q1 | 3.00 | 3.00 | 3.00 |
| 0:Q2 | 3.00 | 3.00 | 3.00 |
| 0:Q3 | 3.00 | 3.00 | 3.00 |
| 0:Q4 | 3.00 | 3.00 | 3.00 |
| 1:Q1 | 2.17 | 2.01 | 2.17 |
| 1:Q2 | 1.24 | 0.77 | 0.25 |
| 1:Q3 | -0.24 | 0.16 | 0.12 |
| 1:Q4 | -1.92 | 0.15 | 0.12 |
| 2:Q1 | -3.75 | 0.13 | 0.12 |
| 2:Q2 | -5.15 | 0.12 | 0.12 |
| 2:Q3 | -6.06 | 0.11 | 0.12 |
| 2:Q4 | -6.23 | 0.10 | 0.12 |
| 3:Q1 | -5.55 | 0.09 | 0.12 |
| 3:Q2 | -4.66 | 0.08 | 0.12 |
| 3:Q3 | -3.36 | 0.07 | 0.12 |
| 3:Q4 | -2.30 | 0.06 | 0.12 |
| 4:Q1 | -1.46 | 0.06 | 0.12 |
| 4:Q2 | -0.77 | 0.05 | 0.12 |
| 4:Q3 | -0.18 | 0.04 | 0.12 |
| 4:Q4 | 0.34 | 0.03 | 0.12 |
| 5:Q1 | 0.81 | 0.03 | 0.12 |
| 5:Q2 | 1.23 | 0.51 | 0.12 |
| 5:Q3 | 1.62 | 0.95 | 0.21 |
| 5:Q4 | 1.98 | 1.36 | 0.60 |
| 6:Q1 | 2.31 | 1.74 | 0.97 |
| 6:Q2 | 2.62 | 2.09 | 1.34 |
| 6:Q3 | 2.88 | 2.41 | 1.69 |
| 6:Q4 | 3.12 | 2.69 | 2.02 |
| 7:Q1 | 3.04 | 2.66 | 2.30 |
| 7:Q2 | 2.97 | 2.64 | 2.54 |
| 7:Q3 | 2.90 | 2.60 | 2.74 |
| 7:Q4 | 2.86 | 2.60 | 2.90 |
| 8:Q1 | 2.82 | 2.60 | 3.03 |
| 8:Q2 | 2.79 | 2.60 | 3.14 |
| 8:Q3 | 2.77 | 2.60 | 3.22 |
| 8:Q4 | 2.75 | 2.61 | 3.28 |
| 9:Q1 | 2.73 | 2.61 | 3.33 |
| 9:Q2 | 2.72 | 2.62 | 3.36 |
| 9:Q3 | 2.71 | 2.63 | 3.39 |
| 9:Q4 | 2.71 | 2.64 | 3.40 |
| 10:Q1 | 2.70 | 2.64 | 3.40 |
| 10:Q2 | 2.70 | 2.65 | 3.40 |
| 10:Q3 | 2.70 | 2.66 | 3.39 |
| 10:Q4 | 2.70 | 2.67 | 3.38 |
| Quarter of Year X |
Constrained policy rule |
Unconstrained policy rule |
Constrained policy rule with forward guidance and asset purchases |
|---|---|---|---|
| 0:Q1 | 4.04 | 4.04 | 4.04 |
| 0:Q2 | 4.04 | 4.04 | 4.04 |
| 0:Q3 | 4.04 | 4.04 | 4.04 |
| 0:Q4 | 4.04 | 4.04 | 4.04 |
| 1:Q1 | 1.71 | 2.58 | 1.82 |
| 1:Q2 | 1.66 | 2.57 | 1.84 |
| 1:Q3 | 1.64 | 2.59 | 1.92 |
| 1:Q4 | 1.67 | 2.64 | 2.01 |
| 2:Q1 | 1.75 | 2.69 | 2.09 |
| 2:Q2 | 1.89 | 2.73 | 2.17 |
| 2:Q3 | 2.07 | 2.78 | 2.25 |
| 2:Q4 | 2.29 | 2.84 | 2.34 |
| 3:Q1 | 2.52 | 2.89 | 2.42 |
| 3:Q2 | 2.73 | 2.95 | 2.50 |
| 3:Q3 | 2.93 | 3.00 | 2.58 |
| 3:Q4 | 3.09 | 3.06 | 2.67 |
| 4:Q1 | 3.22 | 3.13 | 2.75 |
| 4:Q2 | 3.34 | 3.19 | 2.84 |
| 4:Q3 | 3.43 | 3.26 | 2.92 |
| 4:Q4 | 3.51 | 3.32 | 3.01 |
| 5:Q1 | 3.58 | 3.40 | 3.10 |
| 5:Q2 | 3.63 | 3.47 | 3.19 |
| 5:Q3 | 3.68 | 3.53 | 3.28 |
| 5:Q4 | 3.71 | 3.58 | 3.37 |
| 6:Q1 | 3.73 | 3.62 | 3.45 |
| 6:Q2 | 3.74 | 3.64 | 3.51 |
| 6:Q3 | 3.75 | 3.66 | 3.57 |
| 6:Q4 | 3.74 | 3.66 | 3.62 |
| 7:Q1 | 3.73 | 3.66 | 3.66 |
| 7:Q2 | 3.72 | 3.66 | 3.69 |
| 7:Q3 | 3.71 | 3.66 | 3.71 |
| 7:Q4 | 3.70 | 3.66 | 3.72 |
| 8:Q1 | 3.69 | 3.66 | 3.73 |
| 8:Q2 | 3.69 | 3.66 | 3.73 |
| 8:Q3 | 3.68 | 3.67 | 3.73 |
| 8:Q4 | 3.68 | 3.67 | 3.73 |
| 9:Q1 | 3.68 | 3.67 | 3.73 |
| 9:Q2 | 3.67 | 3.67 | 3.72 |
| 9:Q3 | 3.67 | 3.67 | 3.71 |
| 9:Q4 | 3.67 | 3.67 | 3.70 |
| 10:Q1 | 3.67 | 3.67 | 3.68 |
| 10:Q2 | 3.66 | 3.67 | 3.67 |
| 10:Q3 | 3.66 | 3.67 | 3.65 |
| 10:Q4 | 3.66 | 3.67 | 3.64 |
| Quarter of Year X |
Constrained policy rule |
Unconstrained policy rule |
Constrained policy rule with forward guidance and asset purchases |
|---|---|---|---|
| 0:Q1 | 4.80 | 4.80 | 4.80 |
| 0:Q2 | 4.80 | 4.80 | 4.80 |
| 0:Q3 | 4.80 | 4.80 | 4.80 |
| 0:Q4 | 4.80 | 4.80 | 4.80 |
| 1:Q1 | 5.21 | 5.29 | 5.22 |
| 1:Q2 | 5.67 | 5.88 | 5.70 |
| 1:Q3 | 6.39 | 6.70 | 6.43 |
| 1:Q4 | 7.19 | 7.60 | 7.26 |
| 2:Q1 | 8.06 | 8.53 | 8.13 |
| 2:Q2 | 8.72 | 9.21 | 8.79 |
| 2:Q3 | 9.13 | 9.62 | 9.19 |
| 2:Q4 | 9.20 | 9.67 | 9.23 |
| 3:Q1 | 8.86 | 9.30 | 8.85 |
| 3:Q2 | 8.41 | 8.83 | 8.38 |
| 3:Q3 | 7.76 | 8.17 | 7.69 |
| 3:Q4 | 7.22 | 7.62 | 7.11 |
| 4:Q1 | 6.79 | 7.17 | 6.64 |
| 4:Q2 | 6.43 | 6.80 | 6.24 |
| 4:Q3 | 6.13 | 6.48 | 5.89 |
| 4:Q4 | 5.86 | 6.20 | 5.58 |
| 5:Q1 | 5.61 | 5.93 | 5.30 |
| 5:Q2 | 5.39 | 5.69 | 5.04 |
| 5:Q3 | 5.19 | 5.46 | 4.81 |
| 5:Q4 | 5.01 | 5.25 | 4.60 |
| 6:Q1 | 4.84 | 5.06 | 4.42 |
| 6:Q2 | 4.69 | 4.88 | 4.26 |
| 6:Q3 | 4.55 | 4.72 | 4.12 |
| 6:Q4 | 4.44 | 4.59 | 4.01 |
| 7:Q1 | 4.49 | 4.61 | 4.08 |
| 7:Q2 | 4.54 | 4.64 | 4.14 |
| 7:Q3 | 4.59 | 4.67 | 4.22 |
| 7:Q4 | 4.62 | 4.68 | 4.28 |
| 8:Q1 | 4.65 | 4.70 | 4.35 |
| 8:Q2 | 4.68 | 4.71 | 4.41 |
| 8:Q3 | 4.71 | 4.73 | 4.46 |
| 8:Q4 | 4.73 | 4.74 | 4.52 |
| 9:Q1 | 4.75 | 4.75 | 4.57 |
| 9:Q2 | 4.77 | 4.76 | 4.61 |
| 9:Q3 | 4.79 | 4.77 | 4.65 |
| 9:Q4 | 4.80 | 4.78 | 4.69 |
| 10:Q1 | 4.81 | 4.79 | 4.72 |
| 10:Q2 | 4.82 | 4.80 | 4.75 |
| 10:Q3 | 4.83 | 4.81 | 4.77 |
| 10:Q4 | 4.84 | 4.82 | 4.79 |
| Quarter of Year X |
Constrained policy rule |
Unconstrained policy rule |
Constrained policy rule with forward guidance and asset purchases |
|---|---|---|---|
| 0:Q1 | 2.00 | 2.00 | 2.00 |
| 0:Q2 | 2.00 | 2.00 | 2.00 |
| 0:Q3 | 2.00 | 2.00 | 2.00 |
| 0:Q4 | 2.00 | 2.00 | 2.00 |
| 1:Q1 | 1.98 | 1.96 | 1.99 |
| 1:Q2 | 1.94 | 1.91 | 1.97 |
| 1:Q3 | 1.89 | 1.83 | 1.95 |
| 1:Q4 | 1.84 | 1.75 | 1.93 |
| 2:Q1 | 1.80 | 1.69 | 1.91 |
| 2:Q2 | 1.77 | 1.65 | 1.90 |
| 2:Q3 | 1.75 | 1.62 | 1.88 |
| 2:Q4 | 1.72 | 1.60 | 1.87 |
| 3:Q1 | 1.70 | 1.58 | 1.85 |
| 3:Q2 | 1.68 | 1.56 | 1.84 |
| 3:Q3 | 1.66 | 1.54 | 1.82 |
| 3:Q4 | 1.64 | 1.53 | 1.81 |
| 4:Q1 | 1.62 | 1.51 | 1.79 |
| 4:Q2 | 1.60 | 1.50 | 1.78 |
| 4:Q3 | 1.59 | 1.49 | 1.76 |
| 4:Q4 | 1.58 | 1.48 | 1.75 |
| 5:Q1 | 1.57 | 1.47 | 1.74 |
| 5:Q2 | 1.57 | 1.47 | 1.73 |
| 5:Q3 | 1.57 | 1.47 | 1.73 |
| 5:Q4 | 1.57 | 1.47 | 1.73 |
| 6:Q1 | 1.57 | 1.47 | 1.72 |
| 6:Q2 | 1.58 | 1.48 | 1.73 |
| 6:Q3 | 1.59 | 1.49 | 1.73 |
| 6:Q4 | 1.60 | 1.50 | 1.74 |
| 7:Q1 | 1.61 | 1.51 | 1.74 |
| 7:Q2 | 1.63 | 1.53 | 1.75 |
| 7:Q3 | 1.65 | 1.55 | 1.76 |
| 7:Q4 | 1.66 | 1.56 | 1.78 |
| 8:Q1 | 1.68 | 1.58 | 1.79 |
| 8:Q2 | 1.70 | 1.60 | 1.80 |
| 8:Q3 | 1.72 | 1.62 | 1.82 |
| 8:Q4 | 1.73 | 1.64 | 1.83 |
| 9:Q1 | 1.75 | 1.67 | 1.85 |
| 9:Q2 | 1.77 | 1.69 | 1.86 |
| 9:Q3 | 1.78 | 1.70 | 1.87 |
| 9:Q4 | 1.80 | 1.72 | 1.88 |
| 10:Q1 | 1.81 | 1.74 | 1.89 |
| 10:Q2 | 1.82 | 1.76 | 1.90 |
| 10:Q3 | 1.84 | 1.77 | 1.91 |
| 10:Q4 | 1.85 | 1.79 | 1.92 |
Source: David Reifschneider (2016), "Gauging the Ability of the FOMC to Respond to Future Recessions (PDF)," Finance and Economics Discussion Series 2016-068 (Washington: Board of Governors of the Federal Reserve System, August).