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April 24–25, 2012 Authorized for Public Release Appendix 1: Materials used by Mr. Laubach 191 of 226 April 24–25, 2012 Authorized for Public Release Class I FOMC – Restricted (FR) Material for Alternative Scenarios for Contingency Planning Thomas Laubach April 24, 2012 192 of 226 April 24–25, 2012 Authorized for Public Release 193 of 226 Exhibit 1 Alternative Scenarios for Contingency Planning — an Experiment Main Results from the Survey • Nine said scenario 1 (Tealbook baseline) was closest to own modal outlook; most others saw stronger real activity and/or higher inflation • Most thought differences across scenarios merited adjustments to their own individual assessments of appropriate monetary policy • Ten specifically indicated that additional portfolio actions could be appropriate in some circumstances • Enough information provided to infer views on whether the current policy should be maintained, tightened, or eased in each scenario o Eleven favored maintaining status quo or easier policy in scenario 1 o Thirteen favored tighter policy in scenario 2; similar number in scenario 4 o Twelve favored or would consider an easier policy in scenario 3 • Several cited risks (e.g., fiscal policy) as influences on their policy assessments Which Scenario is Closest to Your Own Modal Outlook? (number of responses) 1—March Tealbook baseline 2—stronger real activity 3—weaker real activity 4—higher inflation 9 3 0 2 Mix of 1 and 3 Mix of 1 and 2 1 2 Do Conditions in Scenarios 2 to 4 Warrant a Change in Own Policy Assessment Relative to Scenario 1? (number of responses) 2 No change Tighter policy Easier policy Insufficient information 0 13 0 4 Scenario 3 4 0 0 13 4 1 12 0 4 Should Policy Be Tighter, Easier, or the Same as Current Policy?1 Policy Maintain status quo Tighter Easier Insufficient information Scenario 1 2 3 4 8 4 3 2 1 132 1 2 1 0 123 4 1 122 1 3 1. Current policy defined as maintaining “at least through late 2014” language and initiating no new asset purchases or MEP. 2. Includes two participants who said they might tighten, in that they would consider pulling forward the current liftoff date. 3. Includes two participants who said that they might ease, in that they would consider additional balance sheet actions. April 24–25, 2012 Authorized for Public Release 194 of 226 Exhibit 2 Additional Results and Issues • Many thought judging appropriate policy responses was difficult without more information for each scenario • Frequently mentioned examples of other useful indicators included: o Additional inflation measures, house prices, broader range of financial market data, readings on foreign economic conditions, initial claims, and business surveys o Anecdotal information from business contacts • Some questioned the general design of the exercise o Scenario descriptions did not identify fundamental shocks driving each scenario, nor how events would play out o Scenarios might be more useful if they provided this information • Several participants offered general comments on the potential value of scenario exercises o Three said that they might be useful for internal deliberations, but further work was needed before they could be used in public communications o Two suggested that such exercises could help to provide information on the Committee’s reaction function April 24–25, 2012 Authorized for Public Release Appendix 2: Materials used by Mr. Sack 195 of 226 April 24–25, 2012 Authorized for Public Release Class II FOMC - Restricted FR Material for FOMC Presentation: Financial Market Developments and Desk Operations Brian Sack April 24, 2012 196 of 226 Authorized for Public Release April 24–25, 2012 197 of 226 Class II FOMC – Restricted FR Exhibit 1 (1) Ten-Year Treasury Yield (2) Implied Federal Funds Rate Path* Percent Percent 3.6 FOMC 3.4 1.75 03/12/12 (Pre-FOMC) 03/20/12 (Post-FOMC High) 04/20/12 1.50 Employment Report 3.2 3.0 1.25 2.8 1.00 2.6 0.75 2.4 0.50 2.2 2.0 0.25 1.8 0.00 04/20/12 1.6 04/01/11 07/01/11 10/01/11 01/01/12 30 25 10/20/13 07/20/14 04/20/15 *Derived from federal funds futures and eurodollar futures. Source: Bloomberg, Federal Reserve Bank of New York Source: Bloomberg Percent 01/20/13 04/01/12 (3) Probability Distribution of First Increase in Federal Funds Target Rate* March Survey April Survey (4) Term Premium for Ten-Year Treasury Yield* Percentage Points 1.0 Average Since Late 1990s 0.5 20 15 0.0 10 -0.5 5 0 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 *Average probabilities from dealer responses. Source: Federal Reserve Bank of New York Survey -1.0 04/01/11 07/01/11 10/01/11 01/01/12 04/01/12 *Estimate from Kim-Wright model. Source: Federal Reserve Board of Governors (5) Decomposition of Decline in Ten-Year Yield Since June 2011* (Tealbook Estimates) (6) Expected Change in SOMA Holdings (Over Subsequent Two Years)* $ Billions 600 400 Expected Path of Fed Funds Rate -31 Term Premium Due To: Rate Uncertainty SOMA Holdings European Risk Other Factors -22 -22 -21 -11 *Changes in BPS. Source: Federal Reserve Board of Governors 200 0 -200 -400 -600 01/11 04/11 07/11 10/11 01/12 Date of Primary Dealer Survey *Based on median response from FRBNY primary dealer survey. The observation for March 2012 is based on a similar survey conducted by Macroeconomic Advisers. Source: Federal Reserve Bank of New York Survey, Macroeconomic Advisers Authorized for Public Release April 24–25, 2012 198 of 226 Class II FOMC – Restricted FR Exhibit 2 (7) Euro Area Sovereign Debt Spreads* BPS (8) Patterns in Euro Area Sovereign Debt € Billions 700 Spain Italy 600 Change in Bank Holdings* Projected 2012 Net Issuance** 80 3-Year LTROs 60 500 40 400 20 300 0 200 -20 100 0 04/01/11 Germany 07/01/11 10/01/11 01/01/12 04/01/12 *10-year spreads to Germany. Source: Bloomberg (9) 3-Month Libor-OIS Spreads 120 110 100 90 80 70 60 50 40 30 20 10 0 04/01/11 120 3-Year LTROs 110 Euro-denominated Dollar-denominated (10) Bank Equity Prices FOMC/CCAR KBW Bank Index Euro Stoxx Bank Index 100 90 80 70 60 50 07/01/11 10/01/11 01/01/12 04/01/12 Source: Bloomberg 40 04/01/11 07/01/11 10/01/11 01/01/12 04/01/12 Source: Bloomberg (11) Financial CDS Spreads* Indexed to 04/01/11 BPS 600 550 500 450 400 350 300 250 200 150 100 04/01/11 Spain *Change in holdings of all euro area sovereign debt by banks in that country, from November 2011 to February 2012. **Estimates of net issuance by sovereign. Source: ECB, Barclays Indexed to 04/01/11 BPS Italy Bank Country/Sovereign FOMC/CCAR European Banks U.S. Banks (12) Equity Prices and Corporate Debt Spreads 110 BPS FOMC 105 Moody’s Review 1,000 900 100 800 95 700 90 600 85 500 80 75 07/01/11 10/01/11 01/01/12 *Average 5-year CDS spreads of major financials. Source: Bloomberg 04/01/12 70 04/01/11 400 S&P 500 Index (LHS) High Yield Spread (RHS) 08/01/11 12/01/11 Source: Bloomberg, Bank of America-Merrill Lynch 300 04/01/12 Authorized for Public Release April 24–25, 2012 199 of 226 Class II FOMC – Restricted FR Exhibit 3 (13) Operations for Maturity Extension Program (Through 04/23/12) (14) SOMA Treasury Holdings by Maturity* $ Billions 900 Purchases Sales 302.3 3.0 10.4 370.8 303.7 7.4 1.5 53.9 Par Amount ($ Bil.) Bid-to-Cover (Median) Duration (Years) 10-Year Equivalents ($ Bil.) 6-30 Years 3-6 Years 0-3 Years 800 MEP 700 600 500 400 300 200 04/01/11 (15) SOMA Holdings as Percent of Outstanding* 01/01/12 04/01/12 (16) Treasury and MBS Trading Volumes* $ Trillions 07/31/07 (Before Crisis) 09/30/11 (Before MEP) 06/30/12 (Projected) 40 35 30 25 20 15 10 5 0 10/01/11 *Par values. Source: Federal Reserve Bank of New York Source: Federal Reserve Bank of New York Percent 07/01/11 3.5 MEP Treasury MBS 3.0 2.5 2.0 1.5 03 0-3 33-6 6 66-30 30 Treasury Securities (By Maturity) MBS *Par values as percent of outstanding. Includes only 15- and 30-year FNMA, FHLMC, and GNMA securities for MBS. Source: Federal Reserve Bank of New York, eMBS (17) Probability of Additional Policy Actions Percent 1-Year Interquartile Range 50 01/01/07 01/01/09 01/01/11 *12-week moving averages of total weekly volumes. Source: FR 2004 (18) Changes to Macroeconomic Forecasts That Would Prompt Change in Policy* 0.6 Unemployment Rate Inflation Rate 0.4 1-Year Median 40 0.5 01/01/05 Percentage Points 70 60 1.0 0.2 0.0 30 -0.2 20 Current Meeting Median 10 0 Change Rate Guidance Increase SOMA Duration Source: Federal Reserve Bank of New York Survey Increase SOMA Size -0.4 -0.6 Shorten Forward Guidance Expand Balance Sheet *Required change to the projection for 2014Q4 holding the projection of the other variable fixed, based on median responses from primary dealer survey. Source: Federal Reserve Bank of New York Survey April 24–25, 2012 Authorized for Public Release Appendix 3: Materials used by Mr. Wilcox 200 of 226 April 24–25, 2012 Authorized for Public Release Class II FOMC – Restricted (FR) Material for Forecast Summary David Wilcox April 24, 2012 201 of 226 April 24–25, 2012 Authorized for Public Release Class II FOMC - Restricted (FR) Page 1 of 1 202 of 226 April 24–25, 2012 Authorized for Public Release Appendix 4: Materials used by Ms. Liang 203 of 226 April 24–25, 2012 Authorized for Public Release Class II FOMC – Restricted (FR) Material for FOMC Presentation: Financial Stability Nellie Liang April 24, 2012 204 of 226 Authorized for Public Release April 24–25, 2012 Class II FOMC - Restricted (FR) 205 of 226 Exhibit 1 April 24, 2012 Risks and Vulnerabilities of MMFs and BHCs U.S. Equity Correlation with Selected European CDS Premiums* IMF approves 750 billion euro package Daily EU approves Ireland package 1st ECB LTRO announced 2nd ECB LTRO announced 0.4 0.2 0.0 -0.2 -0.4 Apr. 23 -0.6 -0.8 2010 2011 2012 * Average percent change in CDS premiums on 5-year foreign currency sovereign debt of France, Italy, and Spain (FIS). Note: 1-day stock price returns are used to construct exponentially-weighted moving-average correlation with 1-day percent change in CDS premiums, with 75% of weight distributed over the most recent 22 days. Stock Prices for Select U.S. Banks MMF European Holdings, by Maturity Billions of dollars Index 100 = Jan. 3, 2011 1400 Assets maturing within: Monthly > 1 week 1 week Overnight 150 Bank of America Wells Fargo JP Morgan Weekly 1200 Citigroup Goldman Sachs Morgan Stanley 125 1000 Apr. 20 800 600 100 75 400 50 200 0 Jan. 2011 Mar. May July Sep. Nov. Jan. 2012 25 Jan. Mar. Source: SEC form N-MFP filings. Mar. May July 2011 Oct. Dec. Feb. Apr. 2012 Source: Bloomberg. Moody’s Ratings Review, Feb. 2012 5-Year CDS Premiums for Select U.S. Banks Basis points 600 Weekly • Five of the largest U.S. BHCs on review for Bank of America Wells Fargo JP Morgan Citigroup Goldman Sachs Morgan Stanley 500 Apr. 20 400 300 200 100 0 Jan. Mar. May July 2011 Oct. Dec. Feb. Apr. 2012 Source: Markit. 1 of 3 downgrades Related to structural vulnerabilities of global capital markets business • Possible P-2 and Baa ratings for: Morgan Stanley Bank subsidiaries of: - Bank of America - Citigroup April 24–25, 2012 Authorized for Public Release 206 of 226 Exhibit 2 Class II FOMC - Restricted (FR) April 24, 2012 Balance Sheet Structure of BHCs and Dealer Firms Assets Liab. Assets Liab. Other Assets: Net loans & leases Securities Percent Capital & long-term funding: Capital Debt maturing >1yr Deposits: Insured Deposits: NITD & Domestic Uninsured Liquid Assets: Trading assets and reverse repos Cash and securities Wholesale funding: Debt maturing <1yr Short sales & derivatives Payables & other Repo 100 90 80 70 60 50 40 30 20 10 0 BHCs* Dealer firms** Source. FRY-9C reports as of 2011:Q4. * BHCs include J.P. Morgan, Bank of America, and Citigroup. ** Dealer firms include Goldman Sachs and Morgan Stanley. 2 of 3 Authorized for Public Release April 24–25, 2012 Class II FOMC - Restricted (FR) 207 of 226 Exhibit 3 April 24, 2012 Asset Valuations and Leverage Gross Issuance by Nonfinancial U.S. Corporations High Yield Bond Near- and Far-Term Spreads Billions of dollars Percent 60 Monthly rate Weekly H1 50 High Yield Bonds Institutional Leveraged Loans 20 Near-Term* Far-Term** 18 16 Q1 40 14 12 30 H2 10 Apr. 20 20 8 6 4 10 2 0 2008 2009 2010 2011 0 2006 2012 Source: Reuters Loan Pricing Corporation, Depository Trust & Clearing Corporation, and Thomson Financial. 2007 2008 2009 2010 2011 2012 * Near-term spread between years two and three. ** Far-term spread between years nine and ten. Source: Staff estimates. Triparty Repo Market Activity Securities Lending Activity Billions of dollars per day Billions of dollars per day 3500 Monthly Total Other Equities Other Fixed Income Agency and Treasury 3500 Monthly Total Equities Bonds 3000 3000 2500 2500 2000 2000 1500 1500 1000 1000 500 500 0 2008 2009 2010 2011 0 2008 Note: Data are through April 13, 2012. Source: Federal Reserve Bank of New York. 2009 2010 2011 Note: Data through April 16, 2012. Bonds include corporate bonds, ABS, convertible bonds, US government bonds, the bonds of most Western European countries in addition to Japan, Australia, Canada, and emerging market bonds. Source: Data Explorers Inc. Low Interest Rates Could Create New Vulnerabilities • Could be one impetus for new financial products For example, Exchange Traded Notes offer leveraged returns Limited aggregate size, but will monitor growth and complexity • Financial institutions look to enhance returns Pension funds or insurance companies with target returns may take on excessive risk Depository institutions could mismanage the risks of unexpected shifts in the yield curve 3 of 3 April 24–25, 2012 Authorized for Public Release Appendix 5: Materials used by Ms. Weinbach 208 of 226 Authorized for Public Release April 24–25, 2012 Class I FOMC – Restricted Controlled (FR) Material for Briefing on the Summary of Economic Projections Gretchen Weinbach April 24, 2012 209 of 226 Authorized for Public Release Class I FOMC - Restricted Controlled (FR) April 24–25, 2012 210 of 226 Exhibit 1. Central tendencies and ranges of economic projections, 2012–14 and over the longer run Percent Change in real GDP 4 Central tendency of projections Range of projections 3 2 1 + 0 _ 1 Actual 2 3 2007 2008 2009 2010 2011 2012 2013 2014 Longer run Percent Unemployment rate 9 8 7 6 5 2007 2008 2009 2010 2011 2012 2013 2014 Longer run Percent PCE inflation 3 2 1 2007 2008 2009 2010 2011 2012 2013 2014 Longer run Percent Core PCE inflation 3 2 1 2007 2008 2009 2010 2011 Page 1 of 5 2012 2013 2014 April 24–25, 2012 Authorized for Public Release Class I FOMC - Restricted Controlled (FR) 211 of 226 Exhibit 2. Overview of FOMC participants’ assessments of appropriate monetary policy, April 2012 Number of Participants Appropriate Timing of Policy Firming 9 April projections January projections 8 7 7 6 5 4 3 4 3 3 2 1 2012 2013 2014 2015 2016 Appropriate Pace of Policy Firming Percent Target Federal Funds Rate at Year-End 6 April projections 5 4 3 2 1 0 2012 2013 2014 Longer run Appropriate Pace of Policy Firming Percent Target Federal Funds Rate at Year-End 6 January projections 5 4 3 2 1 0 2012 2013 2014 Longer run Note: In the upper panel, the height of each bar denotes the number of FOMC participants who judge that, under appropriate monetary policy and in the absence of further shocks to the economy, the first increase in the target federal funds rate from its current range of 0 to 1/4 percent will occur in the specified calendar year. In the middle and lower panels, each circle indicates the value (rounded to the nearest 1/4 percent) of an individual participant’s judgment of the appropriate level of the target federal funds rate at the end of the specified calendar year or over the longer run. Page 2 of 5 Authorized for Public Release Class I FOMC - Restricted Controlled (FR) April 24–25, 2012 212 of 226 Exhibit 3. Scatter Plot of Unemployment and PCE Inflation Rates in the Liftoff Year PCE Inflation 4.0 3.5 3.0 2.5 2.0 1.5 1.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Unemployment Rate Liftoff Year 2012 2013 2014 2015 NOTE: Larger markers are used when the projections of two participants are identical. Page 3 of 5 8.5 9.0 April 24–25, 2012 Authorized for Public Release Class I FOMC - Restricted Controlled (FR) 213 of 226 Exhibit 4. Economic projections for 2012-2014 and over the longer run (percent) Change in real GDP 2012 2013 Central Tendency January projections Range January projections Memo: Tealbook January Tealbook January projections Range January projections Memo: Tealbook January Tealbook 2.7 to 3.1 2.8 to 3.2 3.1 to 3.6 3.3 to 4.0 2.3 to 2.6 2.3 to 2.6 2.1 to 3.0 2.1 to 3.0 2.4 to 3.8 2.4 to 3.8 2.9 to 4.3 2.8 to 4.3 2.2 to 3.0 2.2 to 3.0 2.5 2.8 3.3 2.5 2.1 2.4 3.6 2.5 2014 Longer run January projections Range January projections Memo: Tealbook January Tealbook 7.3 to 7.7 7.4 to 8.1 6.7 to 7.4 6.7 to 7.6 5.2 to 6.0 5.2 to 6.0 7.8 to 8.2 7.8 to 8.6 7.0 to 8.1 7.0 to 8.2 6.3 to 7.7 6.3 to 7.7 4.9 to 6.0 5.0 to 6.0 8.0 7.7 7.4 5.2 8.6 8.2 7.8 5.2 2014 Longer run January projections Range January projections Memo: Tealbook January Tealbook PCE inflation 2013 1.9 to 2.0 1.4 to 1.8 1.6 to 2.0 1.4 to 2.0 1.7 to 2.0 1.6 to 2.0 2.0 to 2.0 2.0 to 2.0 1.8 to 2.3 1.3 to 2.5 1.5 to 2.1 1.4 to 2.3 1.5 to 2.2 1.5 to 2.1 2.0 to 2.0 2.0 to 2.0 1.9 1.5 1.5 2.0 1.4 1.3 1.5 2.0 2012 Central Tendency Unemployment rate 2013 7.8 to 8.0 8.2 to 8.5 2012 Central Tendency Longer run 2.4 to 2.9 2.2 to 2.7 2012 Central Tendency 2014 Core PCE inflation 2013 2014 1.8 to 2.0 1.5 to 1.8 1.7 to 2.0 1.5 to 2.0 1.8 to 2.0 1.6 to 2.0 1.7 to 2.0 1.3 to 2.0 1.6 to 2.1 1.4 to 2.0 1.7 to 2.2 1.4 to 2.0 1.8 1.7 1.7 1.5 1.4 1.4 NOTE: The changes in real GDP and inflation are measured Q4/Q4 Page 4 of 5 Authorized for Public Release Class I FOMC - Restricted Controlled (FR) April 24–25, 2012 214 of 226 Exhibit 5. Uncertainty and risks in economic projections Number of participants Uncertainty about GDP growth Broadly similar Risks to GDP growth 18 April projections January projections Lower Number of participants 14 12 12 10 10 8 8 6 6 4 4 2 2 Weighted to downside Broadly balanced Number of participants Lower Broadly similar Risks to the unemployment rate 18 Broadly similar 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 Weighted to downside Broadly balanced Risks to PCE inflation Broadly similar 18 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 Higher Weighted to downside Broadly balanced Number of participants Lower Weighted to upside Number of participants 18 Uncertainty about core PCE inflation 18 16 Number of participants Lower Weighted to upside Number of participants Higher Uncertainty about PCE inflation 16 14 Higher Uncertainty about the unemployment rate 18 April projections January projections 16 Weighted to upside Number of participants Risks to core PCE inflation 18 18 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 Higher Weighted to downside Broadly balanced Weighted to upside NOTE: For definitions of uncertainty and risks in economic projections, see the box “Forecast Uncertainty.” Definitions of variables are in the general note to table 1. Page 5 of 5 April 24–25, 2012 Authorized for Public Release Appendix 6: Materials used by Mr. English 215 of 226 Authorized for Public Release April 24–25, 2012 Class I FOMC – Restricted Controlled (FR) Material for FOMC Briefing on Monetary Policy Alternatives Bill English April 24-25, 2012 216 of 226 April 24–25, 2012 Authorized for Public Release 217 of 226 Class I FOMC – Restricted Controlled (FR) MARCH FOMC STATEMENT 1. Information received since the Federal Open Market Committee met in January suggests that the economy has been expanding moderately. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate. 3. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. 4. The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability. Page 1 of 10 April 24–25, 2012 Authorized for Public Release 218 of 226 Class I FOMC – Restricted Controlled (FR) APRIL FOMC STATEMENT—ALTERNATIVE A 1. Information received since the Federal Open Market Committee met in January March suggests that the economy has been expanding moderately. Labor market conditions have improved further in recent months; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. The housing sector remains depressed. Inflation has been subdued picked up somewhat in recent months, although mainly reflecting higher prices of crude oil and gasoline have increased lately. However, longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate anticipates that, absent further policy stimulus, economic growth over coming quarters would be unacceptably slow and consequently anticipates that the unemployment rate will would decline only very gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices earlier this year will push up is reducing consumers’ purchasing power while boosting inflation temporarily, but the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate. 3.1 To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to continue expand its program to extend the average maturity of its holdings of securities as announced in September. After completing the transactions that it announced last September, the Committee intends to purchase, between July 2012 and the end of March 2013, an additional $400 billion of Treasury securities with remaining maturities of 6 years to 30 years, and to sell an equal amount of Treasury securities with remaining maturities of 4 years or less. These transactions should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability. OR Page 2 of 10 April 24–25, 2012 Authorized for Public Release 219 of 226 Class I FOMC – Restricted Controlled (FR) 3.2 To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to continue its purchase an additional $500 billion of agency mortgage-backed securities by the end of April 2013. The Committee also will complete the program to extend the average maturity of its holdings of securities as that it announced in September. These transactions should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgagebacked securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability. 4. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that economic conditions —including low rates of resource utilization and a subdued outlook for inflation over the medium run— are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. 5. In judging the appropriate stance of monetary policy, the Committee will consider a range of factors, including rates of resource utilization, the projected pace of improvement in labor market conditions, the contours of the medium-run inflation outlook, the stability of longer-run inflation expectations, and the balance of risks that could impede the attainment of the Committee’s goals. Page 3 of 10 April 24–25, 2012 Authorized for Public Release 220 of 226 Class I FOMC – Restricted Controlled (FR) APRIL FOMC STATEMENT—ALTERNATIVE B 1. Information received since the Federal Open Market Committee met in January March suggests that the economy has been expanding moderately. Labor market conditions have improved further in recent months; the unemployment rate has declined notably in recent months but remains elevated. Household spending and business fixed investment have continued to advance. Despite some tentative signs of improvement, the housing sector remains depressed. Inflation has been subdued picked up somewhat in recent months, although mainly reflecting higher prices of crude oil and gasoline have increased lately. However, longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth to remain moderate over coming quarters and then to pick up gradually, supported by highly accommodative monetary policy. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that the Committee it judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices earlier this year will push up is expected to affect inflation only temporarily, but and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate. 3. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. 4. The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability. Page 4 of 10 April 24–25, 2012 Authorized for Public Release 221 of 226 Class I FOMC – Restricted Controlled (FR) APRIL FOMC STATEMENT—ALTERNATIVE C 1. Information received since the Federal Open Market Committee met in January March suggests that the economy has been expanding moderately economic recovery has continued to strengthen. Labor market conditions have improved further; the unemployment rate has declined notably in recent months but remains elevated somewhat more, and private payrolls have expanded moderately on average in recent months. Household spending and business fixed investment have continued to advance. The housing sector remains depressed but has shown some signs of improvement. Sizable increases in the prices of crude oil and gasoline have pushed up inflation somewhat has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects moderate economic growth over coming quarters to pick up over time and consequently anticipates that the unemployment rate will decline gradually move appreciably closer, over the next few years, to toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices earlier this year will push up is expected to affect inflation only temporarily, but; the Committee anticipates that subsequently, with appropriate monetary policy, inflation over the medium term will run at or below close to the rate that it judges most consistent with its dual mandate. 3.1 To support a stronger sustainable economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to ¼ percent and currently anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. In judging when to first increase its target for the federal funds rate, the Committee will consider a range of factors, including rates of resource utilization, the projected pace of improvement in labor market conditions, the contours of the medium-run inflation outlook, the stability of longer-run inflation expectations, and the balance of risks that could impede the attainment of the Committee’s goals. OR Page 5 of 10 April 24–25, 2012 Authorized for Public Release 222 of 226 Class I FOMC – Restricted Controlled (FR) 3.2 To support a stronger sustainable economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to ¼ percent and. In light of the improvement in the economic outlook, the Committee currently now anticipates that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014 until mid-2013. 4. The Committee also decided to continue its complete in June the program to extend the average maturity of its holdings of securities as that it announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgagebacked securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate necessary to promote a stronger economic recovery in a context of maximum employment and price stability. Page 6 of 10 April 24–25, 2012 Authorized for Public Release 223 of 226 Class I FOMC – Restricted Controlled (FR) MARCH 2012 DIRECTIVE The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. Page 7 of 10 April 24–25, 2012 Authorized for Public Release 224 of 226 Class I FOMC – Restricted Controlled (FR) APRIL 2012 DIRECTIVE—ALTERNATIVE A The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. In addition, the Committee directs the Desk to purchase, between July 2012 and the end of March 2013, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 4 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities; in order these actions are intended to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. OR The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. In addition, the Committee directs the Desk to execute purchases of agency mortgage-backed securities in order to increase the total face value of domestic securities held in the System Open Market Account to approximately $3.1 trillion by the end of April 2013. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. Page 8 of 10 April 24–25, 2012 Authorized for Public Release 225 of 226 Class I FOMC – Restricted Controlled (FR) APRIL 2012 DIRECTIVE—ALTERNATIVE B The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. Page 9 of 10 April 24–25, 2012 Authorized for Public Release 226 of 226 Class I FOMC – Restricted Controlled (FR) APRIL 2012 DIRECTIVE—ALTERNATIVE C The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to continue the maturity extension program it began in September to purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policies of rolling over maturing Treasury securities into new issues and of reinvesting principal payments on all agency debt and agency mortgage-backed securities in the System Open Market Account in agency mortgage-backed securities in order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. Page 10 of 10
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