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2019 Annual Report
President’s Letter

Greetings, and welcome to the Bank’s 2019 Annual Report. You have my gratitude for your ongoing
commitment to the Federal Reserve Bank of Chicago. While the Covid-19 pandemic will undoubtedly
impact the economic situation in unprecedented ways throughout the rest of the current year, we take
this opportunity to reflect on what happened in 2019 at the Chicago Fed.
The Economy

The economy was on a solid footing as we entered 2019. Like many of my colleagues, I expected that
economic growth would decelerate but remain above potential. Inflation was also picking up a bit after
running below the Federal Open Market Committee’s (FOMC) 2 percent symmetric target for many
years. These solid fundamentals led me and most FOMC participants to expect that it would likely be
appropriate to raise policy rates another 50 to 75 basis points in 2019. However, as the year progressed,
concerns about weak global growth, trade policy uncertainty, and muted inflation expectations mounted.

The FOMC held policy rates steady for the first half of the year as it evaluated the rising downside risks.
By midyear, a deteriorating outlook and rising uncertainty prompted the FOMC to lower the target range
for the federal funds rate by 25 basis points, followed by two additional 25 basis point reductions later in
the year. I viewed these policy actions as sufficiently accommodative to maintain solid economic growth.
I also saw the actions as promoting a faster return of inflation to our symmetric 2 percent objective.
The year ended with solid annual growth of 2.3 percent and an unemployment rate of only 3.5 percent.
However, inflation edged down further in 2019 and ended the year at only 1.6 percent.

Also last year, the Federal Open Market Committee conducted a major review of its monetary policy
strategies, tools, and communications practices. The review was prompted in part by the difficulties in
providing monetary policy accommodation in an environment in which equilibrium real interest rates
are low. The Chicago Fed played a prominent role in this work, as several of our economists are leaders
in this area and contributed directly to the review process.t
Charles L. Evans,
President and Chief Executive Officer
May 2020

2019 Annual Report


Economic Research: Looking at Monetary Policy Differently

The Bank made important contributions to the FOMC’s initiative reviewing monetary policy strategy, tools,
and communications practices, most notably by hosting the Board of Governors’ Fed Listens conference
in June. Over 170 current and former policymakers, academics, and community leaders met to discuss
key themes of the review, such as monetary policy since the 2008 financial crisis, maintaining sustainable
employment, and how the central bank shares information. In October, the Research Department hosted
the Bank’s own Fed Listens conference to better understand the impact of monetary policy on disadvantaged workers and their communities across the Seventh District.
The Bank launched a new “Big Data” view of the economy called the Brave-Butters-Kelley Indexes
(BBKI). Combining 500 different data series with GDP, the indexes can be used to track U.S. businesses
and inflation cycles in real time and estimate monthly real GDP growth, providing a new way to measure
the health of the U.S. economy.

Supervision & Regulation: Increasing Our Efficiency

A team of S&R specialists enhanced a Federal Reserve System supervisory model, improving productivity
and reducing processing time from more than 24 hours to just 70 minutes. The District’s S&R leadership
led artificial intelligence and machine learning projects focused on increasing operational and supervisory
efficiency that may have a broader impact across the System.
The number of examinations and inspections conducted in 2019 grew by 9 percent to 807.

2019 Annual Report


Payments: Improving Transaction Speeds,
Evolving Access to Services

The Customer Relations and Support Office (CRSO) played a key role in developing, leading, and
advancing efforts to improve the U.S. payment system. Specifically, the CRSO made significant contributions to further the System’s faster payments decision to offer the FedNowSM service, a new instant
payment service providing immediate settlement and funds availability. As a key function for delivering
and supporting the service, the CRSO created specific work streams to support market development
activities, connectivity via the FedLine channel, and customer support enhancements. Further, the CRSO
made significant progress and investments in evolving the FedLine network used by customers to access
Federal Reserve Bank services.

Community Outreach:
Connecting with Our District in New Ways

The Chicago Fed’s Community Development and Policy Studies group (CDPS) held the Preserving Chicago’s
Middle Neighborhoods forum to address growing inequities among its constituents. Researchers addressed the
changing trajectories of middle-class neighborhoods and policies for safeguarding the housing market.
CDPS also organized approximately 40 events that informed stakeholders about best practices, data and
programs, and networking opportunities, including:

•The Renewing the Promise of the Middle Class research conference that explored the role of policy in creating a wider
path to the middle class and highlighting research that focused on successes and shortcomings of recent policy initiatives.

•The Fed’s Inclusive Economies Initiative included a series of focus groups with community leaders in mid-sized Seventh
District cities, understanding how these communities think about connecting economic growth to economic opportunity.
•The Fed’s Community Development Finance in Smaller Markets Initiative included organized efforts in understanding
the ecosystem of investors, intermediaries, and service providers.
2019 Annual Report


Culture: Highlighting Our Diversity & Inclusion

The Bank’s cultural efforts were recognized by several external organizations in 2019, including the
following awards:

2019 Top Companies for Executive Women
National Association for Female Executives

Perfect Score of 100 on HRC Foundation’s
2019 Corporate Equality Index
Human Rights Campaign (HRC)

2019 Best Place to Work for LGBTQ Equality

2019 Annual Report


New Executive Committee Members

Kathryn Medina was promoted to Senior Vice President
of People & Culture and Chief Human Resources Officer

Anna Paulson was promoted to Executive Vice President
and Director of Research

Frederick Martin became Senior Vice President and
Chief Financial Officer (CFO)

2019 Annual Report


2019 Chicago Board of Directors

Federal Reserve Chair Jerome Powell (center) visited the Chicago Fed in June 2019
(Pictured left to right): Helen D. Gayle, Class B Director; Jorge Ramirez*, Class B Director; David W. Nelms, Class A Director;
Scott E. Santi* (Deputy Chair), Class C Director; Anne R. Pramaggiore* (Chair), Class C Director; Jerome Powell, Federal
Reserve Chair; Charles Evans, President & CEO, Federal Reserve Bank of Chicago; Ellen Bromagen, First Vice President &
COO, Federal Reserve Bank of Chicago; Abram A. Tubbs, Class A Director; Susan M. Collins, Class B Director; Christopher J.
Murphy III, Class A Director; Wright L. Lassiter III (not pictured) Class C Director
* Fulfilled a previous director’s unexpired term

2019 Detroit Board of Directors

Federal Reserve Chair Jerome Powell (center) visited the Chicago Fed in June 2019
(Pictured left to right): Michael L. Seneski*, Michael Hoppe Senior Vice President, Detroit Branch Manager; Linda P.
Hubbard, Joseph B. Anderson, Jr.*, (Chair); Jerome Powell, Federal Reserve Chair; Charles Evans, President & CEO, Federal
Reserve Bank of Chicago; Ellen Bromagen, First Vice President & COO, Federal Reserve Bank of Chicago; Sandy Baruah *,
James Nicholson*, Sandra Pierce*, Rip Rapson*, (not pictured)
* Fulfilled a previous director’s unexpired term
2019 Annual Report


New Directors for 2020
Linda Jojo
Class B Director
Executive Vice President
of Technology & Chief
Digital Officer,
United Airlines, Inc.

Michael O’Grady
Class A Director
Northern Trust Bank

Dave Habiger
Class B Director
President & CEO,
J.D. Power

Ronald E. Hall
President & CEO,
Bridgewater Interiors

Susan Whitson
Class A Director
First National Bank

Financial Statements
Auditor Independence

The Federal Reserve Board engaged KPMG to audit the 2019 combined and individual financial
statements of the Reserve Banks. 1

In 2019, KPMG also conducted audits of internal controls over financial reporting for each of the
Reserve Banks. Fees for KPMG services totaled $7.0 million. To ensure auditor independence, the Board
of Governors requires that KPMG be independent in all matters relating to the audits. Specifically,
KPMG may not perform services for the Reserve Banks or others that would place it in a position of
auditing its own work, making management decisions on behalf of the Reserve Banks, or in any other way
impairing its audit independence. In 2019, the Bank did not engage KPMG for any non-audit services.
The Federal Reserve Bank of Chicago — Financial Statements as of and for the Years Ended December 31,
2019 and 2018, Management’s Report on Internal Control Over Financial Reporting, and Independent
Auditors’ Report
In addition, KPMG audited the Office of Employee Benefits of the Federal Reserve System (OEB), the Retirement Plan for
Employees of the Federal Reserve System (System Plan), and the Thrift Plan for Employees of the Federal Reserve System
(Thrift Plan). The System Plan and the Thrift Plan provide retirement benefits to employees of the Board, the Federal Reserve
Banks, the OEB, and the Consumer Financial Protection Bureau.

2019 Annual Report