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Accessible Version Meeting of the Federal Open Market Committee April 2728, 2010 Presentation Materials Presentation Materials (PDF) Pages 173 to 206 of the Transcript Appendix 1: Materials used by Mr. Sack Material for FOMC Presentation: Financial Market Developments and Desk Operations Brian Sack April 27, 2010 Class II FOMC Restricted FR Exhibit 1 Topleft panel (1) Title: Equity Prices Series: Standard & Poor's 500 Index, MSCI World Index Horizon: August 1, 2008 April 23, 2010 Description: Major equity indexes advanced over the intermeeting period. A vertical line marks the FOMC meeting of March 16, 2010. Source: Bloomberg Topright panel (2) Title: Equity Risk Premium Series: Equity Premium Horizon: January 1, 1990 April 21, 2010 Description: The equity risk premium remains elevated. Source: Federal Reserve Board of Governors. Middleleft panel (3) Title: Corporate Bond Spreads Series: High yield and investment grade corporate bond spreads Horizon: August 1, 2008 April 22, 2010 Description: Corporate bond spreads narrowed further over the intermeeting period. Source: Bank of America Middleright panel (4) Title: CMBS Spreads Series: CMBS spreads for junior, mezzanine and super senior tranches Horizon: August 1, 2008 April 16, 2010 Description: CMBS spreads narrowed over the intermeeting period. Source: JP Morgan Bottomleft panel (5) Title: Bank Equities Series: Percent change in selected financial institution equity prices from 3/15/10 to 4/15/10, and from 4/15/10 to 4/26/10 Horizon: March 15, 2010 April 26, 2010 Description: Equity prices gained sharply through midApril, but declined following the SEC's announcement of legal action against Goldman Sachs on April 16. GS, DB, UBS, JPM, BAC, WFC, MS, C, Regional Bank Index Source: Bloomberg Bottomright panel (6) Title: Peripheral EuroArea Yield Spreads to German Debt* Series: Level of the debt spread on March 15, 2010, and change in the spread between March 15 and April 26 Horizon: March 15, 2010 April 26, 2010 Description: Bond spreads on Greek and other peripheral Euroarea countries (Portugal, Ireland, and Spain) have widened over the intermeeting period. * 2yr yields. Return to text Source: Bloomberg Exhibit 2 Topleft panel (7) Title: Implied Federal Funds Rate Series: Future federal funds rates implied by Eurodollar and federal funds futures contracts Horizon: 3/15/10, 4/23/10 Description: The implied path of the federal funds rate has not changed over the intermeeting period. Source: Federal Reserve Bank of New York Topright panel (8) Title: Average Probability Distribution of First Policy Rate Increase Series: Primary dealer and buyside firm expectations for the timing of the first policy rate increase Horizon: N/A Description: Survey respondents placed the highest probabilities on the first tightening occurring either in the second half of this year or the first half of next year. Source: Federal Reserve Bank of New York Policy Survey, including responses from primary dealers and buyside firms Middleleft panel (9) Title: Treasury Yields Series: Yields for the 2year, 5year, and 10year Treasury note Horizon: August 1, 2008 April 23, 2010 Description: Treasury yields edged higher over the intermeeting period. Source: Bloomberg Middleright panel (10) Title: Swap Spreads Series: 2year and 10year swap spreads Horizon: August 1, 2008 April 23, 2010 Description: Swap spreads have reached unusually tight levels by historical standards. Source: Bloomberg Bottomleft panel (11) Title: 10Year Treasury Term Premium Series: Treasury term premium Horizon: August 1, 2005 April 23, 2010 Description: The Treasury term premium remains higher than its levels in recent years. Source: Federal Reserve Bank of New York Bottomright panel (12) Average Probability of Federal Reserve Treasury Redemption Policies Treasuries Redeemed 2010 Q2 2011 Q2 2012 Q2 All 23% 24% 23% Some 11% 26% 34% None 66% 50% 43% Source: Federal Reserve Bank of New York Dealer Policy Survey Exhibit 3 Topleft panel (13) Title: Weekly Pace of Purchases Series: Weekly purchases of MBS and agency debt Horizon: December 10, 2008 April 21, 2010 Description: The desk completed the purchases of agency debt and MBS at the end of March. Source: Federal Reserve Bank of New York Topright panel (14) Title: MBS Weekly Trading Volumes Series: Fourweek moving average of MBS trading volumes Horizon: January 1, 2008 April 21, 2010 Description: Liquidity in the MBS market has not been materially affected by the end of the purchase programs. Source: FR2004 (1/2 interdealer + customer) Middleleft panel (15) Title: MBS Spreads Series: Fannie Mae fixedrate current coupon optionadjusted spreads to Treasury and to swaps Horizon: January 1, 2009 April 22, 2010 Description: MBS spreads have moved higher from the very low levels reached in 2009. Source: Barclays Capital Middleright panel (16) Title: Impact on Yields from Purchase Programs Series: Primary dealer and buyside firm beliefs concerning the impact of the purchase programs on yields Horizon: N/A Description: Survey respondents believe the effect of the purchases was as much as 100 bps but that about 30 bps of that effect has unwound. Source: Federal Reserve Bank of New York Policy Survey, including responses from primary dealers and buyside firms Bottomleft panel (17) Probability of Asset Sales Time Horizon 2 Yrs 5 Yrs Treasuries 15% 25% Agencies 20% 50% MBS 25% 70% Source: Federal Reserve Bank of New York Policy Survey, including responses from primary dealers and buyside firms Bottomright panel (18) Title: Impact on Yields from MBS Sales Series: Primary dealer and buyside firm beliefs about the impact of MBS sales on yields Horizon: N/A Description: Survey respondents believe that a decision to begin selling MBS would put upward pressure on Treasury yields and the MBS rate. Source: Federal Reserve Bank of New York Policy Survey, including responses from primary dealers and buyside firms Exhibit 4 Topleft panel (19) Title: Treasury Repo and Fed Funds Rates Series: The general collateral Treasury repo rate and the effective federal funds rate Horizon: October 1, 2009 April 23, 2010 Description: Overnight interest rates have firmed since the beginning of March. Source: Federal Reserve Bank of New York Topright panel (20) Title: Excess Reserves and the Fed Funds Rate Series: The effective federal funds rate and the level of excess reserves Horizon: January 2, 2009 April 23, 2010 Description: Recent observations for the effective federal funds rate have been higher than they had been in the past at similarly high levels of excess reserves. Source: Federal Reserve Bank of New York Bottomleft panel (21) Title: Fed Funds Futures Rates Series: Rates implied by federal funds futures contracts Horizon: February 1, 2010 April 23, 2010 Description: The rates on federal funds futures contracts through May have all shifted higher. Source: Bloomberg Bottomright panel (22) Title: Factors Leading to Increase in Fed Funds Rate* Series: Survey respondents' rankings of various factors leading to the recent increase in the fed funds rate Horizon: N/A Description: Survey respondents have pointed to the increase in the SFP issuance and the supply of Treasury collateral as the most important factors in recent firmness in the federal funds rate. Announcement of SFP: 3.17. Increases in Treasury Supply: 2.94. Decreases in Reserves: 2.47. GSE Delinquent Buyouts: 2.24. Increase in Primary Credit Rate: 1.47. * Ratings were constructed by assigning the following values: Not important=1, Somewhat Important=2, Important =3, Very Important=4. The weighted average was then taken to construct the average rating. Return to text Source: Federal Reserve Bank of New York Dealer Policy Survey Appendix 2: Materials used by Mr. Madigan Material for Briefing on Strategies for Asset Sales and Redemptions Brian Madigan April 27, 2010 Class I FOMC Restricted Controlled (FR) Table 1: Possible LongerRun Approaches to Redemptions and Asset Sales Characteristics Assumed in the Staff Analysis Sales of agencyrelated securities Treasury Redemptions Begin Average pace $billion/month Start Finish Conditionality of Sales Option 1: No asset sales None $0 N/A N/A N/A Option 2: Asset sales after increase in target May 3 $15 One quarter after target increase Five years after sales commence Moderate Option 3: Conditional pace of sales May 3 $15 Before increase in the target, but increase in target under Option 3 would be later than under baseline. Five years after sales commence, depending on developments Strong Option 4: Reverse taper May 3 $5 in 2011 $10 in 2012 $20 in 201315 January 2011 December 2015 Virtually none Option 5: Rapid sales May 3 $30 July 2010 June 2013 Limited Exhibit 2 Balance Sheets Greenbookconsistent Projections Topleft panel SOMA holdings Monthly $ Billions Period Option 1 Option 2 Option 3 Option 4 Option 5 Option 6* January 2010 1910.38 1910.38 1910.38 1910.38 1910.38 1910.38 February 2010 1970.88 1970.88 1970.88 1970.88 1970.88 1970.88 March 2010 2014.39 2014.39 2014.39 2014.39 2014.39 2014.39 April 2010 2041.29 2042.59 2042.89 2042.89 2042.89 2042.57 May 2010 2049.15 2021.85 2022.25 2022.25 2022.25 2021.83 June 2010 2065.72 2034.81 2035.40 2035.40 2035.40 2035.40 July 2010 2055.80 2021.92 2022.56 2022.56 1961.55 2022.54 August 2010 2048.81 2007.90 2008.57 2008.58 1916.94 2008.54 September 2010 2042.30 1996.78 1997.48 1997.49 1874.74 1997.43 October 2010 2030.55 1982.38 1983.18 1983.18 1834.44 1983.08 November 2010 2021.73 1968.28 1969.18 1969.17 1791.50 1969.03 December 2010 2014.11 1954.96 1955.96 1955.93 1748.57 1955.75 January 2011 2002.38 1937.40 1939.93 1934.27 1705.79 1939.04 February 2011 1992.10 1917.41 1921.47 1910.16 1660.58 1921.34 March 2011 1972.44 1899.39 1904.99 1888.04 1617.34 1896.25 April 2011 1957.87 1880.62 1886.12 1863.52 1571.72 1873.73 May 2011 1944.66 1865.33 1870.72 1842.49 1529.57 1856.05 June 2011 1935.07 1849.28 1854.58 1820.70 1486.67 1841.24 July 2011 1924.24 1834.71 1839.36 1799.83 1444.70 1825.98 August 2011 1915.02 1817.65 1821.65 1776.49 1400.24 1809.84 September 2011 1906.95 1804.04 1807.40 1756.59 1359.23 1798.30 October 2011 1900.00 1788.81 1791.33 1734.88 1316.41 1786.04 November 2011 1891.90 1768.12 1769.79 1707.70 1268.12 1767.15 December 2011 1883.63 1752.92 1753.76 1686.02 1225.33 1753.60 January 2012 1876.11 1733.42 1719.97 1656.55 1180.56 1734.01 February 2012 1868.59 1711.13 1683.40 1624.30 1133.00 1711.63 March 2012 1861.06 1691.05 1649.04 1594.26 1087.65 1691.46 April 2012 1854.16 1648.81 1605.27 1554.82 1032.91 1662.52 May 2012 1847.27 1613.12 1569.43 1523.30 999.71 1641.51 June 2012 1840.37 1583.58 1539.75 1497.94 1009.39 1626.65 July 2012 1833.04 1551.53 1507.55 1470.07 1019.09 1608.83 August 2012 1825.72 1512.17 1468.04 1434.87 1028.82 1583.70 September 2012 1818.40 1481.95 1437.67 1408.82 1038.56 1567.71 October 2012 1810.87 1451.87 1407.44 1382.92 1048.00 1551.67 November 2012 1803.35 1416.44 1371.87 1351.66 1057.79 1530.29 December 2012 1795.83 1386.30 1341.58 1325.70 1067.60 1514.19 January 2013 1789.77 1359.27 1314.48 1293.57 1075.50 1500.54 February 2013 1783.72 1330.14 1285.28 1259.35 1084.24 1484.80 March 2013 1777.66 1306.39 1261.47 1230.50 1093.00 1474.44 April 2013 1771.99 1281.87 1236.88 1200.89 1102.94 1463.72 May 2013 1766.32 1258.92 1213.86 1172.84 1111.76 1454.58 June 2013 1760.66 1235.59 1190.47 1144.42 1120.60 1445.07 July 2013 1754.57 1211.81 1166.62 1130.46 1129.47 1434.68 August 2013 1748.49 1184.34 1139.09 1139.56 1138.37 1420.60 September 2013 1742.40 1160.94 1146.81 1148.68 1147.30 1410.60 October 2013 1735.99 1159.05 1155.98 1157.84 1156.25 1401.43 November 2013 1729.58 1168.16 1165.17 1167.02 1165.23 1389.56 December 2013 1723.17 1177.30 1174.38 1176.23 1174.23 1379.41 January 2014 1717.46 1184.27 1181.59 1183.40 1181.36 1367.92 February 2014 1711.74 1191.25 1188.82 1190.60 1188.52 1355.18 March 2014 1706.03 1198.26 1196.07 1197.82 1195.69 1344.01 April 2014 1700.57 1205.29 1203.34 1205.06 1202.89 1333.22 May 2014 1695.11 1212.34 1210.64 1212.32 1210.10 1319.72 June 2014 1689.65 1219.41 1217.95 1219.60 1217.34 1309.35 July 2014 1683.56 1226.51 1225.29 1226.91 1224.61 1298.44 August 2014 1677.47 1233.62 1232.65 1234.24 1231.90 1285.60 September 2014 1671.38 1241.01 1240.03 1241.59 1239.20 1274.96 October 2014 1664.81 1248.09 1247.44 1248.96 1246.54 1263.54 November 2014 1658.25 1255.19 1254.87 1256.36 1253.89 1251.77 December 2014 1651.68 1262.31 1262.32 1263.78 1261.27 1259.23 January 2015 1646.81 1269.23 1269.19 1270.58 1268.03 1266.08 February 2015 1641.93 1276.16 1276.08 1277.41 1274.81 1272.95 March 2015 1637.06 1283.12 1283.00 1284.26 1281.61 1279.84 April 2015 1632.57 1290.10 1289.93 1291.13 1288.43 1286.75 May 2015 1628.08 1297.09 1296.89 1298.01 1295.27 1293.67 June 2015 1623.58 1303.91 1303.86 1304.92 1302.13 1300.62 July 2015 1618.28 1310.75 1310.86 1311.85 1309.01 1307.59 August 2015 1612.98 1317.60 1317.87 1318.80 1315.92 1314.59 September 2015 1607.67 1324.48 1324.91 1325.77 1322.84 1321.60 October 2015 1601.88 1331.38 1331.97 1332.76 1329.79 1328.63 November 2015 1596.09 1338.30 1339.05 1339.78 1336.75 1335.68 December 2015 1590.30 1345.24 1346.15 1346.81 1343.74 1342.76 January 2016 1584.28 1352.17 1352.98 1353.63 1350.65 1349.77 February 2016 1578.26 1359.12 1359.84 1360.47 1357.58 1356.80 March 2016 1572.25 1366.09 1366.71 1367.33 1364.53 1363.85 April 2016 1566.67 1373.07 1373.60 1374.21 1371.49 1370.92 May 2016 1561.10 1380.07 1380.51 1381.11 1378.48 1378.01 June 2016 1555.53 1387.10 1387.44 1388.02 1385.48 1385.11 July 2016 1549.15 1394.14 1394.39 1394.96 1392.51 1392.24 August 2016 1542.77 1401.20 1401.36 1401.91 1399.55 1399.39 September 2016 1536.39 1408.28 1408.34 1408.89 1406.61 1406.55 October 2016 1529.55 1415.39 1415.35 1415.88 1413.69 1413.73 November 2016 1522.71 1422.51 1422.38 1422.89 1420.80 1420.94 December 2016 1515.87 1429.65 1429.42 1429.92 1427.92 1428.16 January 2017 1510.27 1436.57 1436.35 1436.84 1434.82 1435.17 February 2017 1504.67 1443.51 1443.29 1443.78 1441.74 1442.19 March 2017 1499.06 1450.47 1450.25 1450.74 1448.68 1449.24 April 2017 1493.95 1457.46 1457.23 1457.72 1455.64 1456.30 May 2017 1488.83 1464.46 1464.23 1464.72 1462.62 1463.39 June 2017 1483.71 1471.48 1471.25 1471.74 1469.62 1470.49 July 2017 1483.37 1478.52 1478.29 1478.78 1476.64 1477.61 August 2017 1490.49 1485.58 1485.35 1485.83 1483.68 1484.76 September 2017 1497.63 1492.66 1492.43 1492.91 1490.74 1491.92 October 2017 1504.79 1499.76 1499.53 1500.01 1497.82 1499.10 November 2017 1511.97 1506.88 1506.65 1507.13 1504.92 1506.31 December 2017 1519.17 1514.03 1513.78 1514.26 1512.04 1513.53 January 2018 1526.70 1521.49 1521.24 1521.72 1519.46 1521.07 February 2018 1534.25 1528.97 1528.72 1529.20 1526.91 1528.64 March 2018 1541.82 1536.47 1536.22 1536.70 1534.38 1536.22 April 2018 1549.41 1543.99 1543.74 1544.22 1541.87 1543.82 May 2018 1557.02 1551.54 1551.28 1551.77 1549.38 1551.45 June 2018 1564.65 1559.10 1558.85 1559.33 1556.91 1559.10 July 2018 1572.31 1566.69 1566.43 1566.91 1564.46 1566.77 August 2018 1579.98 1574.30 1574.04 1574.52 1572.03 1574.45 September 2018 1587.68 1581.92 1581.66 1582.14 1579.62 1582.17 October 2018 1595.39 1589.57 1589.31 1589.79 1587.23 1589.90 November 2018 1603.13 1597.25 1596.98 1597.46 1594.87 1597.65 December 2018 1610.89 1604.94 1604.67 1605.15 1602.53 1605.43 January 2019 1618.83 1612.79 1612.52 1613.00 1610.34 1613.36 February 2019 1626.78 1620.67 1620.39 1620.87 1618.17 1621.31 March 2019 1634.76 1628.56 1628.28 1628.77 1626.02 1629.29 April 2019 1642.76 1636.48 1636.20 1636.68 1633.90 1637.29 May 2019 1650.78 1644.42 1644.14 1644.62 1641.80 1645.31 June 2019 1658.83 1652.38 1652.09 1652.58 1649.72 1653.35 July 2019 1666.89 1660.37 1660.08 1660.56 1657.66 1661.41 August 2019 1674.98 1668.37 1668.08 1668.56 1665.62 1669.50 September 2019 1683.09 1676.40 1676.10 1676.59 1673.60 1677.61 October 2019 1691.23 1684.45 1684.15 1684.63 1681.61 1685.74 November 2019 1699.38 1692.53 1692.22 1692.70 1689.64 1693.89 December 2019 1707.56 1700.62 1700.31 1700.79 1697.69 1702.07 January 2020 1716.06 1709.03 1708.72 1709.20 1706.05 1710.55 February 2020 1724.59 1717.46 1717.14 1717.62 1714.44 1719.05 March 2020 1733.14 1725.91 1725.59 1726.07 1722.84 1727.58 April 2020 1741.72 1734.39 1734.06 1734.54 1731.27 1736.13 May 2020 1750.31 1742.89 1742.56 1743.03 1739.72 1744.70 June 2020 1758.93 1751.41 1751.07 1751.55 1748.20 1753.30 July 2020 1767.57 1759.95 1759.61 1760.09 1756.69 1761.91 August 2020 1776.24 1768.51 1768.18 1768.65 1765.21 1770.55 September 2020 1784.92 1777.10 1776.76 1777.23 1773.75 1779.22 October 2020 1793.64 1785.71 1785.37 1785.84 1782.32 1787.90 November 2020 1802.37 1794.35 1794.00 1794.47 1790.91 1796.61 December 2020 1811.13 1803.00 1802.65 1803.12 1799.52 1805.35 * Redemptions for Treasury and agency securities, redemptions and prepayments for agency mortgagebacked securities; no asset sales. Return to table Topright panel MBS holdings Monthly $ Billions Period Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 January 2010 970.12 970.12 970.12 970.12 970.12 970.12 February 2010 1026.78 1026.78 1026.78 1026.78 1026.78 1026.78 March 2010 1068.70 1068.70 1068.70 1068.70 1068.70 1068.70 April 2010 1096.47 1096.49 1096.79 1096.79 1096.79 1096.47 May 2010 1105.73 1105.75 1106.15 1106.15 1106.15 1105.73 June 2010 1124.25 1124.28 1124.88 1124.88 1124.88 1124.88 July 2010 1120.14 1120.20 1120.84 1120.84 1059.89 1120.82 August 2010 1116.02 1116.12 1116.79 1116.80 1027.78 1116.76 September 2010 1111.91 1112.04 1112.74 1112.75 995.68 1112.70 October 2010 1104.59 1104.82 1105.63 1105.62 963.57 1105.53 November 2010 1097.27 1097.61 1098.51 1098.49 931.46 1098.35 December 2010 1089.95 1090.39 1091.39 1091.37 899.35 1091.18 January 2011 1081.05 1081.58 1084.11 1079.30 867.24 1082.43 February 2011 1072.15 1072.77 1076.83 1067.23 835.13 1073.67 March 2011 1063.25 1063.96 1069.55 1055.16 803.03 1064.91 April 2011 1056.05 1056.78 1062.27 1043.09 770.92 1057.74 May 2011 1048.86 1049.60 1055.00 1031.02 738.81 1050.57 June 2011 1041.67 1042.42 1047.72 1018.95 706.70 1043.40 July 2011 1035.11 1035.79 1040.44 1006.88 674.60 1036.72 August 2011 1028.54 1029.16 1033.16 994.82 642.49 1030.04 September 2011 1021.98 1022.53 1025.88 982.75 610.38 1023.37 October 2011 1015.63 1016.09 1018.60 970.68 578.27 1016.87 November 2011 1009.29 1009.65 1011.32 958.61 546.16 1010.38 December 2011 1002.94 1003.21 1004.05 946.54 514.06 1003.88 January 2012 997.68 997.89 985.08 931.95 485.02 998.51 February 2012 992.43 992.56 966.11 917.35 455.98 993.14 March 2012 987.17 987.24 947.13 902.75 426.94 987.77 April 2012 982.54 969.75 928.16 888.16 397.90 983.03 May 2012 977.91 950.89 909.19 873.56 368.86 978.30 June 2012 973.28 932.03 890.22 858.97 339.82 973.56 July 2012 968.22 913.17 871.25 844.37 310.79 968.38 August 2012 963.16 894.31 852.28 829.78 281.75 963.19 September 2012 958.11 875.45 833.31 815.18 252.71 958.01 October 2012 952.85 856.59 814.34 800.59 223.67 952.64 November 2012 947.60 837.73 795.37 785.99 194.63 947.27 December 2012 942.35 818.88 776.40 771.40 165.59 941.90 January 2013 937.92 801.41 758.89 748.91 138.03 937.40 February 2013 933.49 783.95 741.39 726.42 110.48 932.90 March 2013 929.06 766.49 723.88 703.94 82.92 928.40 April 2013 925.03 749.03 706.38 681.45 55.36 924.33 May 2013 920.99 731.56 688.87 658.96 27.80 920.26 June 2013 916.95 714.10 671.36 636.48 0 916.19 June 2013 916.95 714.10 671.36 636.48 0 916.19 July 2013 912.50 696.64 653.86 613.99 0 911.70 August 2013 908.04 679.18 636.35 591.50 0 907.21 September 2013 903.59 661.71 618.85 569.02 0 902.73 October 2013 898.81 644.25 601.34 546.53 0 897.92 November 2013 894.03 626.79 583.84 524.04 0 893.12 December 2013 889.25 609.33 566.33 501.56 0 888.32 January 2014 885.08 592.72 549.71 480.27 0 884.14 February 2014 880.91 576.12 533.10 458.98 0 879.95 March 2014 876.74 559.52 516.48 437.69 0 875.77 April 2014 872.83 542.92 499.86 416.39 0 871.85 May 2014 868.91 526.31 483.25 395.10 0 867.93 June 2014 865.00 509.71 466.63 373.81 0 864.01 July 2014 860.45 493.11 450.02 352.52 0 859.45 August 2014 855.91 476.50 433.40 331.23 0 854.90 September 2014 851.37 459.90 416.78 309.94 0 850.35 October 2014 846.34 443.30 400.17 288.65 0 845.32 November 2014 841.32 426.70 383.55 267.36 0 840.29 December 2014 836.30 410.09 366.93 246.07 0 835.26 January 2015 831.90 394.29 351.15 225.58 0 830.87 February 2015 827.51 378.50 335.37 205.09 0 826.48 March 2015 823.12 362.70 319.59 184.60 0 822.09 April 2015 819.10 346.90 303.81 164.12 0 818.08 May 2015 815.09 331.10 288.03 143.63 0 814.07 June 2015 811.07 315.30 272.25 123.14 0 810.06 July 2015 806.25 299.51 256.47 102.65 0 805.25 August 2015 801.42 283.71 240.69 82.16 0 800.43 September 2015 796.59 267.91 224.91 61.67 0 795.62 October 2015 791.28 252.11 209.13 41.18 0 790.32 November 2015 785.97 236.31 193.35 20.70 0 785.03 December 2015 780.65 220.51 177.57 0 0 779.73 January 2016 776.07 205.69 162.79 0 0 775.16 February 2016 771.48 190.87 148.00 0 0 770.59 March 2016 766.90 176.04 133.22 0 0 766.02 April 2016 762.76 161.22 118.44 0 0 761.89 May 2016 758.62 146.39 103.66 0 0 757.77 June 2016 754.48 131.57 88.87 0 0 753.64 July 2016 749.53 116.75 74.09 0 0 748.71 August 2016 744.58 101.92 59.31 0 0 743.77 September 2016 739.63 87.10 44.53 0 0 738.84 October 2016 734.22 72.28 29.75 0 0 733.45 November 2016 728.81 57.45 14.96 0 0 728.06 December 2016 723.41 42.63 0 0 0 722.67 January 2017 718.79 28.50 0 0 0 718.06 February 2017 714.17 14.37 0 0 0 713.46 February 2017 714.17 14.37 0 0 0 713.46 March 2017 709.55 0 0 0 0 708.85 April 2017 705.41 0 0 0 0 704.73 May 2017 701.28 0 0 0 0 700.60 June 2017 697.14 0 0 0 0 696.48 July 2017 692.23 0 0 0 0 691.58 August 2017 687.32 0 0 0 0 686.68 September 2017 682.41 0 0 0 0 681.78 October 2017 677.08 0 0 0 0 676.47 November 2017 671.76 0 0 0 0 671.16 December 2017 666.43 0 0 0 0 665.85 January 2018 661.91 0 0 0 0 661.34 February 2018 657.39 0 0 0 0 656.82 March 2018 652.87 0 0 0 0 652.31 April 2018 648.83 0 0 0 0 648.29 May 2018 644.80 0 0 0 0 644.26 June 2018 640.77 0 0 0 0 640.24 July 2018 636.00 0 0 0 0 635.48 August 2018 631.24 0 0 0 0 630.72 September 2018 626.47 0 0 0 0 625.97 October 2018 621.32 0 0 0 0 620.81 November 2018 616.16 0 0 0 0 615.65 December 2018 611.01 0 0 0 0 610.49 January 2019 606.63 0 0 0 0 606.13 February 2019 602.26 0 0 0 0 601.77 March 2019 597.88 0 0 0 0 597.42 April 2019 593.98 0 0 0 0 593.53 May 2019 590.08 0 0 0 0 589.64 June 2019 586.17 0 0 0 0 585.75 July 2019 581.58 0 0 0 0 581.17 August 2019 576.99 0 0 0 0 576.59 September 2019 572.40 0 0 0 0 572.01 October 2019 567.45 0 0 0 0 567.07 November 2019 562.51 0 0 0 0 562.13 December 2019 557.56 0 0 0 0 557.19 January 2020 553.26 0 0 0 0 553.00 February 2020 548.96 0 0 0 0 548.80 March 2020 544.67 0 0 0 0 544.60 April 2020 540.37 0 0 0 0 540.86 May 2020 536.08 0 0 0 0 537.11 June 2020 531.78 0 0 0 0 533.36 July 2020 527.48 0 0 0 0 528.97 August 2020 523.19 0 0 0 0 524.58 September 2020 518.89 0 0 0 0 520.19 October 2020 514.59 0 0 0 0 515.47 November 2020 510.30 0 0 0 0 510.74 December 2020 506.00 0 0 0 0 506.01 Bottomleft panel Treasury holdings Monthly $ Billions Period Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 January 2010 776.59 776.59 776.59 776.59 776.59 776.59 February 2010 776.59 776.59 776.59 776.59 776.59 776.59 March 2010 776.70 776.70 776.70 776.70 776.70 776.70 April 2010 776.70 777.99 777.99 777.99 777.99 777.99 May 2010 776.70 749.38 749.38 749.38 749.38 749.38 June 2010 776.70 745.76 745.76 745.76 745.76 745.76 July 2010 776.28 742.34 742.34 742.34 742.34 742.34 August 2010 776.28 735.28 735.28 735.28 735.28 735.28 September 2010 776.28 730.63 730.63 730.63 730.63 730.63 October 2010 776.28 727.88 727.88 727.88 727.88 727.88 November 2010 776.28 722.49 722.49 722.49 722.49 722.49 December 2010 776.70 717.11 717.11 717.11 717.11 717.11 January 2011 776.70 711.98 711.98 711.98 711.98 711.98 February 2011 776.70 704.42 704.42 704.42 704.42 704.42 March 2011 776.70 698.84 698.84 698.84 698.84 698.84 April 2011 776.70 690.87 690.87 690.87 690.87 690.87 May 2011 776.70 686.38 686.38 686.38 686.38 686.38 June 2011 776.70 681.14 681.14 681.14 681.14 681.14 July 2011 776.70 676.82 676.82 676.82 676.82 676.82 August 2011 776.70 670.02 670.02 670.02 670.02 670.02 September 2011 776.70 666.66 666.66 666.66 666.66 666.66 October 2011 776.70 661.50 661.50 661.50 661.50 661.50 November 2011 776.70 650.86 650.86 650.86 650.86 650.86 December 2011 776.70 645.73 645.73 645.73 645.73 645.73 January 2012 776.70 633.77 633.77 633.77 633.77 633.77 February 2012 776.70 619.03 619.03 619.03 619.03 619.03 March 2012 776.70 606.50 606.50 606.50 606.50 606.50 April 2012 776.70 584.57 584.57 584.57 584.57 584.57 May 2012 776.70 570.56 570.56 570.56 584.18 570.56 June 2012 776.70 562.70 562.70 562.70 626.68 562.70 July 2012 776.70 552.34 552.34 552.34 669.19 552.34 August 2012 776.70 534.65 534.65 534.65 711.73 534.65 September 2012 776.70 526.11 526.11 526.11 754.29 526.11 October 2012 776.70 517.71 517.71 517.71 796.55 517.71 November 2012 776.70 503.97 503.97 503.97 839.15 503.97 December 2012 776.70 495.51 495.51 495.51 881.78 495.51 January 2013 776.70 487.99 487.99 487.99 920.07 487.99 February 2013 776.70 478.37 478.37 478.37 962.44 478.37 March 2013 776.70 474.14 474.14 474.14 1001.61 474.14 April 2013 776.70 469.13 469.13 469.13 1041.94 469.13 May 2013 776.70 465.69 465.69 465.69 1081.16 465.69 June 2013 776.70 461.88 461.88 461.88 1120.60 461.88 July 2013 776.70 457.60 457.60 472.52 1129.47 457.60 August 2013 776.70 449.65 449.65 506.23 1138.37 449.65 September 2013 776.70 445.76 476.95 539.97 1147.30 445.76 October 2013 776.70 463.38 505.70 573.73 1156.25 443.03 November 2013 776.70 492.01 534.47 607.51 1165.23 437.59 December 2013 776.70 520.66 563.26 641.33 1174.23 433.88 January 2014 776.70 546.01 588.87 671.53 1181.36 428.10 February 2014 776.70 571.38 614.49 701.76 1188.52 421.10 March 2014 776.70 596.77 640.14 732.01 1195.69 415.66 April 2014 776.70 622.18 665.81 762.28 1202.89 410.33 May 2014 776.70 647.62 691.50 792.57 1210.10 402.30 June 2014 776.70 673.07 717.21 822.88 1217.34 397.39 July 2014 776.70 698.55 742.95 853.22 1224.61 392.58 August 2014 776.70 724.05 768.71 883.57 1231.90 385.84 September 2014 776.70 749.82 794.48 913.95 1239.20 381.30 October 2014 776.70 775.29 820.29 944.35 1246.54 376.45 November 2014 776.70 800.77 846.11 974.78 1253.89 371.26 December 2014 776.70 826.27 871.96 1005.23 1261.27 385.29 January 2015 776.70 849.86 895.53 1033.60 1268.03 397.01 February 2015 776.70 873.47 919.12 1062.00 1274.81 408.75 March 2015 776.70 897.10 942.74 1090.41 1281.61 420.51 April 2015 776.70 920.75 966.37 1118.85 1288.43 431.90 May 2015 776.70 944.42 990.03 1147.31 1295.27 443.32 June 2015 776.70 967.91 1013.70 1175.78 1302.13 454.75 July 2015 776.70 991.43 1037.40 1204.28 1309.01 467.02 August 2015 776.70 1014.96 1061.12 1232.80 1315.92 479.30 September 2015 776.70 1038.51 1084.85 1261.34 1322.84 491.60 October 2015 776.70 1062.08 1108.61 1289.90 1329.79 504.41 November 2015 776.70 1085.68 1132.39 1318.48 1336.75 517.24 December 2015 776.70 1109.29 1156.19 1346.81 1343.74 530.08 January 2016 776.67 1132.15 1178.84 1353.63 1350.65 543.06 February 2016 776.63 1155.02 1201.51 1360.47 1357.58 556.06 March 2016 776.60 1177.91 1224.20 1367.33 1364.53 569.08 April 2016 776.56 1200.83 1246.90 1374.21 1371.49 581.67 May 2016 776.53 1223.76 1269.63 1381.11 1378.48 594.28 June 2016 776.49 1246.70 1292.38 1388.02 1385.48 606.91 July 2016 776.46 1269.67 1315.14 1394.96 1392.51 620.37 August 2016 776.42 1292.66 1337.92 1401.91 1399.55 633.84 September 2016 776.39 1315.67 1360.73 1408.89 1406.61 647.34 October 2016 776.35 1338.69 1383.55 1415.88 1413.69 661.31 November 2016 776.32 1361.74 1406.39 1422.89 1420.80 675.30 December 2016 776.28 1384.81 1429.42 1429.92 1427.92 689.31 January 2017 776.28 1406.48 1436.35 1436.84 1434.82 701.91 February 2017 776.28 1428.17 1443.29 1443.78 1441.74 714.52 March 2017 776.28 1450.12 1450.25 1450.74 1448.68 727.16 April 2017 776.28 1457.46 1457.23 1457.72 1455.64 739.33 May 2017 776.28 1464.46 1464.23 1464.72 1462.62 751.52 June 2017 776.28 1471.48 1471.25 1471.74 1469.62 763.73 July 2017 781.83 1478.52 1478.29 1478.78 1476.64 776.73 August 2017 794.85 1485.58 1485.35 1485.83 1483.68 789.75 September 2017 807.88 1492.66 1492.43 1492.91 1490.74 802.80 October 2017 821.35 1499.76 1499.53 1500.01 1497.82 816.28 November 2017 834.84 1506.88 1506.65 1507.13 1504.92 829.77 December 2017 848.35 1514.03 1513.78 1514.26 1512.04 843.29 January 2018 860.56 1521.49 1521.24 1521.72 1519.46 855.51 February 2018 872.80 1528.97 1528.72 1529.20 1526.91 867.75 March 2018 885.06 1536.47 1536.22 1536.70 1534.38 880.01 April 2018 896.85 1543.99 1543.74 1544.22 1541.87 891.81 May 2018 908.66 1551.54 1551.28 1551.77 1549.38 903.62 June 2018 920.49 1559.10 1558.85 1559.33 1556.91 915.46 July 2018 933.07 1566.69 1566.43 1566.91 1564.46 928.05 August 2018 945.68 1574.30 1574.04 1574.52 1572.03 940.66 September 2018 958.30 1581.92 1581.66 1582.14 1579.62 953.29 October 2018 971.34 1589.57 1589.31 1589.79 1587.23 966.35 November 2018 984.40 1597.25 1596.98 1597.46 1594.87 979.43 December 2018 997.47 1604.94 1604.67 1605.15 1602.53 992.53 January 2019 1009.79 1612.79 1612.52 1613.00 1610.34 1004.83 February 2019 1022.13 1620.67 1620.39 1620.87 1618.17 1017.14 March 2019 1034.49 1628.56 1628.28 1628.77 1626.02 1029.48 April 2019 1046.40 1636.48 1636.20 1636.68 1633.90 1041.37 May 2019 1058.33 1644.42 1644.14 1644.62 1641.80 1053.29 June 2019 1070.28 1652.38 1652.09 1652.58 1649.72 1065.22 July 2019 1082.94 1660.37 1660.08 1660.56 1657.66 1077.87 August 2019 1095.62 1668.37 1668.08 1668.56 1665.62 1090.54 September 2019 1108.33 1676.40 1676.10 1676.59 1673.60 1103.23 October 2019 1121.41 1684.45 1684.15 1684.63 1681.61 1116.31 November 2019 1134.52 1692.53 1692.22 1692.70 1689.64 1129.41 December 2019 1147.65 1700.62 1700.31 1700.79 1697.69 1142.52 January 2020 1160.46 1709.03 1708.72 1709.20 1706.05 1155.20 February 2020 1173.28 1717.46 1717.14 1717.62 1714.44 1167.91 March 2020 1186.13 1725.91 1725.59 1726.07 1722.84 1180.63 April 2020 1199.00 1734.39 1734.06 1734.54 1731.27 1192.93 May 2020 1211.89 1742.89 1742.56 1743.03 1739.72 1205.24 June 2020 1224.80 1751.41 1751.07 1751.55 1748.20 1217.59 July 2020 1237.74 1759.95 1759.61 1760.09 1756.69 1230.59 August 2020 1250.70 1768.51 1768.18 1768.65 1765.21 1243.63 September 2020 1263.69 1777.10 1776.76 1777.23 1773.75 1256.68 October 2020 1276.70 1785.71 1785.37 1785.84 1782.32 1270.09 November 2020 1289.73 1794.35 1794.00 1794.47 1790.91 1283.53 December 2020 1302.78 1803.00 1802.65 1803.12 1799.52 1296.99 Bottomright panel Reserve balances Monthly $ Billions Period Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 January 2010 1153.96 1153.96 1153.96 1153.96 1153.96 1153.96 February 2010 1225.18 1225.18 1225.18 1225.18 1225.18 1225.18 March 2010 1053.88 1053.88 1053.88 1053.88 1053.88 1053.88 April 2010 976.08 977.20 977.37 962.28 976.73 977.40 May 2010 1082.13 1054.25 1054.59 1039.43 1053.32 1054.87 June 2010 1032.07 1000.30 1000.81 985.56 998.90 1001.85 July 2010 1035.91 1001.65 1002.16 986.07 937.85 1002.77 August 2010 1041.26 999.68 1000.20 985.03 904.63 1001.14 September 2010 962.42 915.91 916.60 923.22 789.15 917.74 October 2010 964.69 915.20 916.13 921.53 761.91 917.44 November 2010 973.87 918.77 919.94 924.12 736.03 921.41 December 2010 986.69 924.96 926.69 926.93 712.59 928.61 January 2011 967.24 899.75 903.09 897.52 662.33 904.39 February 2011 949.24 872.09 877.05 865.66 609.62 879.17 March 2011 921.84 846.40 852.96 835.76 558.88 846.54 April 2011 899.51 819.93 826.48 803.46 505.74 816.47 May 2011 878.51 796.93 803.46 774.63 456.06 791.22 June 2011 861.13 773.15 779.66 745.02 405.62 768.82 July 2011 842.48 750.84 756.78 716.33 356.08 745.95 August 2011 825.42 726.02 731.40 685.14 304.05 722.20 September 2011 809.49 704.64 709.45 657.37 255.45 703.02 October 2011 794.67 681.62 685.68 627.79 205.03 683.10 November 2011 778.67 653.12 656.42 592.72 149.13 656.54 December 2011 762.49 630.10 632.64 563.13 98.71 635.30 January 2012 745.03 600.59 589.02 523.82 44.36 605.91 February 2012 727.54 568.27 542.60 481.70 25.00 573.71 March 2012 710.03 538.14 498.36 441.77 25.00 543.70 April 2012 693.13 485.83 444.71 392.42 25.00 504.89 May 2012 676.19 440.04 398.95 350.96 25.00 473.99 June 2012 659.24 400.39 359.32 315.64 25.00 449.22 July 2012 641.83 358.21 317.17 277.80 25.00 421.47 August 2012 624.40 308.68 267.67 232.60 25.00 386.37 September 2012 606.94 268.27 227.29 196.53 25.00 360.40 October 2012 589.26 227.99 187.04 160.58 25.00 334.36 November 2012 571.56 182.33 141.41 119.26 25.00 302.94 December 2012 553.83 141.95 101.05 83.21 25.00 276.79 January 2013 538.78 106.06 65.02 42.16 25.00 254.22 February 2013 523.70 68.05 26.88 25.00 25.00 229.54 March 2013 508.60 35.40 25.00 25.00 25.00 210.21 April 2013 493.86 25.00 25.00 25.00 25.00 190.50 May 2013 479.09 25.00 25.00 25.00 25.00 172.33 June 2013 464.30 25.00 25.00 25.00 25.00 153.77 July 2013 449.06 25.00 25.00 25.00 25.00 134.30 August 2013 433.79 25.00 25.00 25.00 25.00 111.12 September 2013 418.50 25.00 25.00 25.00 25.00 91.98 October 2013 402.85 25.00 25.00 25.00 25.00 73.66 November 2013 387.17 25.00 25.00 25.00 25.00 52.60 December 2013 371.47 25.00 25.00 25.00 25.00 33.24 January 2014 358.51 25.00 25.00 25.00 25.00 25.00 February 2014 345.53 25.00 25.00 25.00 25.00 25.00 March 2014 332.52 25.00 25.00 25.00 25.00 25.00 April 2014 319.75 25.00 25.00 25.00 25.00 25.00 May 2014 306.95 25.00 25.00 25.00 25.00 25.00 June 2014 294.13 25.00 25.00 25.00 25.00 25.00 July 2014 280.67 25.00 25.00 25.00 25.00 25.00 August 2014 267.18 25.00 25.00 25.00 25.00 25.00 September 2014 253.66 25.00 25.00 25.00 25.00 25.00 October 2014 239.65 25.00 25.00 25.00 25.00 25.00 November 2014 225.61 25.00 25.00 25.00 25.00 25.00 December 2014 211.55 25.00 25.00 25.00 25.00 25.00 January 2015 199.82 25.00 25.00 25.00 25.00 25.00 February 2015 188.07 25.00 25.00 25.00 25.00 25.00 March 2015 176.30 25.00 25.00 25.00 25.00 25.00 April 2015 164.89 25.00 25.00 25.00 25.00 25.00 May 2015 153.46 25.00 25.00 25.00 25.00 25.00 June 2015 142.01 25.00 25.00 25.00 25.00 25.00 July 2015 129.73 25.00 25.00 25.00 25.00 25.00 August 2015 117.43 25.00 25.00 25.00 25.00 25.00 September 2015 105.10 25.00 25.00 25.00 25.00 25.00 October 2015 92.27 25.00 25.00 25.00 25.00 25.00 November 2015 79.42 25.00 25.00 25.00 25.00 25.00 December 2015 66.54 25.00 25.00 25.00 25.00 25.00 January 2016 53.52 25.00 25.00 25.00 25.00 25.00 February 2016 40.48 25.00 25.00 25.00 25.00 25.00 March 2016 27.41 25.00 25.00 25.00 25.00 25.00 April 2016 25.00 25.00 25.00 25.00 25.00 25.00 May 2016 25.00 25.00 25.00 25.00 25.00 25.00 June 2016 25.00 25.00 25.00 25.00 25.00 25.00 July 2016 25.00 25.00 25.00 25.00 25.00 25.00 August 2016 25.00 25.00 25.00 25.00 25.00 25.00 September 2016 25.00 25.00 25.00 25.00 25.00 25.00 October 2016 25.00 25.00 25.00 25.00 25.00 25.00 November 2016 25.00 25.00 25.00 25.00 25.00 25.00 December 2016 25.00 25.00 25.00 25.00 25.00 25.00 January 2017 25.00 25.00 25.00 25.00 25.00 25.00 February 2017 25.00 25.00 25.00 25.00 25.00 25.00 March 2017 25.00 25.00 25.00 25.00 25.00 25.00 April 2017 25.00 25.00 25.00 25.00 25.00 25.00 May 2017 25.00 25.00 25.00 25.00 25.00 25.00 June 2017 25.00 25.00 25.00 25.00 25.00 25.00 July 2017 25.00 25.00 25.00 25.00 25.00 25.00 August 2017 25.00 25.00 25.00 25.00 25.00 25.00 September 2017 25.00 25.00 25.00 25.00 25.00 25.00 October 2017 25.00 25.00 25.00 25.00 25.00 25.00 November 2017 25.00 25.00 25.00 25.00 25.00 25.00 December 2017 25.00 25.00 25.00 25.00 25.00 25.00 January 2018 25.00 25.00 25.00 25.00 25.00 25.00 February 2018 25.00 25.00 25.00 25.00 25.00 25.00 March 2018 25.00 25.00 25.00 25.00 25.00 25.00 April 2018 25.00 25.00 25.00 25.00 25.00 25.00 May 2018 25.00 25.00 25.00 25.00 25.00 25.00 June 2018 25.00 25.00 25.00 25.00 25.00 25.00 July 2018 25.00 25.00 25.00 25.00 25.00 25.00 August 2018 25.00 25.00 25.00 25.00 25.00 25.00 September 2018 25.00 25.00 25.00 25.00 25.00 25.00 October 2018 25.00 25.00 25.00 25.00 25.00 25.00 November 2018 25.00 25.00 25.00 25.00 25.00 25.00 December 2018 25.00 25.00 25.00 25.00 25.00 25.00 January 2019 25.00 25.00 25.00 25.00 25.00 25.00 February 2019 25.00 25.00 25.00 25.00 25.00 25.00 March 2019 25.00 25.00 25.00 25.00 25.00 25.00 April 2019 25.00 25.00 25.00 25.00 25.00 25.00 May 2019 25.00 25.00 25.00 25.00 25.00 25.00 June 2019 25.00 25.00 25.00 25.00 25.00 25.00 July 2019 25.00 25.00 25.00 25.00 25.00 25.00 August 2019 25.00 25.00 25.00 25.00 25.00 25.00 September 2019 25.00 25.00 25.00 25.00 25.00 25.00 October 2019 25.00 25.00 25.00 25.00 25.00 25.00 November 2019 25.00 25.00 25.00 25.00 25.00 25.00 December 2019 25.00 25.00 25.00 25.00 25.00 25.00 January 2020 25.00 25.00 25.00 25.00 25.00 25.00 February 2020 25.00 25.00 25.00 25.00 25.00 25.00 March 2020 25.00 25.00 25.00 25.00 25.00 25.00 April 2020 25.00 25.00 25.00 25.00 25.00 25.00 May 2020 25.00 25.00 25.00 25.00 25.00 25.00 June 2020 25.00 25.00 25.00 25.00 25.00 25.00 July 2020 25.00 25.00 25.00 25.00 25.00 25.00 August 2020 25.00 25.00 25.00 25.00 25.00 25.00 September 2020 25.00 25.00 25.00 25.00 25.00 25.00 October 2020 25.00 25.00 25.00 25.00 25.00 25.00 November 2020 25.00 25.00 25.00 25.00 25.00 25.00 December 2020 25.00 25.00 25.00 25.00 25.00 25.00 Exhibit 3 Macroeconomic Consequences Under Alternative Balance Sheet Strategies Greenbookconsistent Projections Topleft panel Federal funds rate Percent Date Option 1 Option 2 Option 5 Option 6* 31 March 2010 0.12 0.12 0.12 0.12 30 June 2010 0.12 0.12 0.12 0.12 30 September 2010 0.12 0.12 0.12 0.12 31 December 2010 0.12 0.12 0.12 0.12 31 March 2011 0.12 0.12 0.12 0.12 30 June 2011 0.12 0.12 0.12 0.12 30 September 2011 0.12 0.12 0.12 0.12 31 December 2011 0.12 0.13 0.12 0.13 31 March 2012 0.45 0.18 0.13 0.30 30 June 2012 0.78 0.48 0.29 0.61 30 September 2012 1.16 0.84 0.64 0.98 31 December 2012 1.57 1.23 1.04 1.38 31 March 2013 2.06 1.71 1.52 1.86 30 June 2013 2.46 2.09 1.91 2.26 30 September 2013 2.78 2.41 2.24 2.58 31 December 2013 3.03 2.66 2.50 2.83 31 March 2014 3.22 2.85 2.71 3.02 30 June 2014 3.38 3.01 2.88 3.18 30 September 2014 3.51 3.14 3.03 3.31 31 December 2014 3.62 3.27 3.17 3.44 31 March 2015 3.70 3.36 3.27 3.52 30 June 2015 3.77 3.44 3.37 3.60 30 September 2015 3.83 3.50 3.43 3.66 31 December 2015 3.88 3.54 3.48 3.71 31 March 2016 3.92 3.58 3.53 3.75 30 June 2016 3.95 3.61 3.56 3.78 30 September 2016 3.98 3.64 3.60 3.81 31 December 2016 4.00 3.66 3.63 3.84 * Redemptions for Treasury and agency securities, redemptions and prepayments for agency mortgagebacked securities; no asset sales. Return to table Topright panel 10year Treasury interest rate Percent Date Option 1 Option 2 Option 5 Option 6 31 March 2010 3.85 3.85 3.85 3.85 30 June 2010 3.90 3.90 3.90 3.90 30 September 2010 3.95 4.17 4.33 4.08 31 December 2010 4.05 4.27 4.43 4.18 31 March 2011 4.10 4.31 4.47 4.23 30 June 2011 4.20 4.41 4.56 4.32 30 September 2011 4.25 4.45 4.59 4.37 31 December 2011 4.35 4.54 4.66 4.46 31 March 2012 4.40 4.58 4.68 4.50 30 June 2012 4.44 4.62 4.70 4.54 30 September 2012 4.50 4.67 4.74 4.60 31 December 2012 4.53 4.69 4.73 4.61 31 March 2013 4.58 4.73 4.76 4.66 30 June 2013 4.61 4.74 4.76 4.68 30 September 2013 4.64 4.76 4.77 4.70 31 December 2013 4.65 4.76 4.75 4.70 31 March 2014 4.65 4.74 4.73 4.70 30 June 2014 4.66 4.74 4.72 4.70 30 September 2014 4.67 4.73 4.72 4.71 31 December 2014 4.69 4.74 4.72 4.71 31 March 2015 4.69 4.73 4.71 4.71 30 June 2015 4.70 4.73 4.70 4.71 30 September 2015 4.71 4.72 4.70 4.71 31 December 2015 4.73 4.73 4.70 4.72 31 March 2016 4.74 4.73 4.70 4.72 30 June 2016 4.76 4.73 4.70 4.73 30 September 2016 4.77 4.74 4.71 4.74 31 December 2016 4.78 4.74 4.72 4.75 Middleleft panel 30year mortgage rate Percent Date Option 1 Option 2 Option 5 Option 6 31 March 2010 5.00 5.00 5.00 5.00 30 June 2010 5.30 5.30 5.30 5.30 30 September 2010 5.45 5.66 5.97 5.57 31 December 2010 5.55 5.76 6.06 5.67 31 March 2011 5.60 5.81 6.10 5.72 30 June 2011 5.70 5.90 6.19 5.82 30 September 2011 5.75 5.94 6.22 5.86 31 December 2011 5.85 6.04 6.29 5.96 31 March 2012 5.92 6.09 6.33 6.02 30 June 2012 5.96 6.22 6.35 6.06 30 September 2012 6.01 6.26 6.37 6.10 31 December 2012 6.04 6.29 6.39 6.13 31 March 2013 6.11 6.35 6.43 6.19 30 June 2013 6.17 6.40 6.46 6.24 30 September 2013 6.23 6.45 6.36 6.30 31 December 2013 6.29 6.49 6.39 6.34 31 March 2014 6.34 6.52 6.42 6.38 30 June 2014 6.38 6.55 6.45 6.42 30 September 2014 6.42 6.58 6.47 6.46 31 December 2014 6.47 6.61 6.50 6.49 31 March 2015 6.50 6.63 6.52 6.52 30 June 2015 6.53 6.65 6.53 6.54 30 September 2015 6.57 6.67 6.55 6.57 31 December 2015 6.60 6.69 6.57 6.59 31 March 2016 6.62 6.70 6.59 6.61 30 June 2016 6.65 6.72 6.60 6.63 30 September 2016 6.68 6.74 6.62 6.65 31 December 2016 6.70 6.76 6.64 6.67 Middleright panel Real GDP growth* Percent Date Option 1 Option 2 Option 5 Option 6 31 March 2010 2.30 2.30 2.30 2.30 30 June 2010 3.40 3.40 3.40 3.40 30 September 2010 3.72 3.72 3.73 3.72 31 December 2010 3.27 3.18 3.11 3.22 31 March 2011 3.73 3.53 3.40 3.62 30 June 2011 3.90 3.60 3.39 3.73 30 September 2011 4.17 3.77 3.49 3.93 31 December 2011 4.39 3.98 3.72 4.15 31 March 2012 4.43 4.05 3.81 4.21 30 June 2012 4.57 4.24 4.05 4.38 30 September 2012 4.66 4.37 4.24 4.50 31 December 2012 4.71 4.48 4.41 4.59 31 March 2013 4.87 4.69 4.68 4.79 30 June 2013 4.80 4.66 4.70 4.74 30 September 2013 4.67 4.58 4.65 4.64 31 December 2013 4.45 4.39 4.49 4.43 31 March 2014 4.12 4.11 4.23 4.13 30 June 2014 3.84 3.85 3.99 3.86 30 September 2014 3.58 3.62 3.77 3.61 31 December 2014 3.41 3.49 3.63 3.46 31 March 2015 3.33 3.43 3.57 3.39 30 June 2015 3.21 3.34 3.46 3.29 30 September 2015 3.08 3.21 3.33 3.16 31 December 2015 2.95 3.09 3.19 3.03 31 March 2016 2.82 2.95 3.04 2.90 30 June 2016 2.74 2.86 2.94 2.82 30 September 2016 2.67 2.81 2.88 2.76 31 December 2016 2.61 2.76 2.82 2.71 * Q4/Q4 growth rate Return to text Bottomleft panel Unemployment rate Percent Date Option 1 Option 2 Option 5 Option 6 31 March 2010 9.72 9.72 9.72 9.72 30 June 2010 9.57 9.57 9.57 9.57 30 September 2010 9.58 9.58 9.58 9.58 31 December 2010 9.36 9.38 9.39 9.37 31 March 2011 8.99 9.04 9.07 9.02 30 June 2011 8.81 8.89 8.96 8.86 30 September 2011 8.60 8.73 8.82 8.68 31 December 2011 8.31 8.47 8.59 8.40 31 March 2012 7.95 8.15 8.29 8.07 30 June 2012 7.53 7.75 7.90 7.66 30 September 2012 7.06 7.31 7.47 7.21 31 December 2012 6.60 6.86 7.02 6.75 31 March 2013 6.21 6.48 6.63 6.36 30 June 2013 5.91 6.19 6.34 6.07 30 September 2013 5.69 5.98 6.11 5.85 31 December 2013 5.54 5.82 5.93 5.69 31 March 2014 5.44 5.72 5.82 5.59 30 June 2014 5.37 5.64 5.72 5.52 30 September 2014 5.32 5.58 5.65 5.46 31 December 2014 5.28 5.52 5.57 5.40 31 March 2015 5.24 5.46 5.50 5.35 30 June 2015 5.21 5.42 5.44 5.31 30 September 2015 5.19 5.38 5.40 5.29 31 December 2015 5.17 5.35 5.36 5.26 31 March 2016 5.17 5.33 5.33 5.25 30 June 2016 5.17 5.32 5.31 5.24 30 September 2016 5.17 5.30 5.29 5.23 31 December 2016 5.17 5.29 5.27 5.22 Bottomright panel Core PCE inflation* Percent Date Option 1 Option 2 Option 5 Option 6 31 March 2010 1.38 1.38 1.38 1.38 30 June 2010 1.16 1.16 1.16 1.16 30 September 2010 1.14 1.11 1.10 1.12 31 December 2010 1.01 0.97 0.95 0.99 31 March 2011 1.06 1.02 0.99 1.03 30 June 2011 1.02 0.97 0.94 0.99 30 September 2011 1.00 0.96 0.94 0.98 31 December 2011 0.98 0.94 0.92 0.96 31 March 2012 0.99 0.95 0.93 0.97 30 June 2012 1.01 0.97 0.95 0.99 30 September 2012 1.04 1.00 0.98 1.02 31 December 2012 1.08 1.05 1.03 1.06 31 March 2013 1.14 1.10 1.08 1.11 30 June 2013 1.20 1.15 1.13 1.17 30 September 2013 1.26 1.21 1.19 1.23 31 December 2013 1.32 1.27 1.25 1.29 31 March 2014 1.39 1.33 1.30 1.36 30 June 2014 1.45 1.38 1.36 1.41 30 September 2014 1.50 1.43 1.40 1.46 31 December 2014 1.55 1.48 1.45 1.51 31 March 2015 1.59 1.52 1.48 1.55 30 June 2015 1.63 1.55 1.52 1.59 30 September 2015 1.67 1.59 1.55 1.62 31 December 2015 1.70 1.61 1.58 1.66 31 March 2016 1.73 1.64 1.60 1.68 30 June 2016 1.76 1.66 1.63 1.71 30 September 2016 1.78 1.68 1.65 1.73 31 December 2016 1.81 1.70 1.66 1.75 * Q4/Q4 growth rate Return to text Appendix 3: Materials used by Mr. Madigan Material for Briefing on FOMC Participants' Economic Projections Brian Madigan April 27, 2010 Class I FOMC Restricted Controlled (FR) Exhibit 1. Central tendencies and ranges of economic projections, 201012 and over the longer run Actual values for years 2005 through 2009. Change in real GDP Percent 2005 2006 2007 2008 2009 2010 2011 2012 Longer Run 2.7 2.4 2.5 1.9 0.1 Upper End of Range 4.0 4.6 5.0 3.0 Upper End of Central Tendency 3.7 4.5 4.5 2.8 Lower End of Central Tendency 3.2 3.4 3.5 2.5 Lower End of Range 2.7 3.0 2.8 2.4 2005 2006 2007 2008 2009 2010 2011 2012 Longer Run 5.0 4.5 4.8 6.9 10.0 Upper End of Range 9.7 8.7 7.7 6.3 Upper End of Central Tendency 9.5 8.5 7.5 5.3 Lower End of Central Tendency 9.1 8.1 6.6 5.0 Lower End of Range 8.6 7.2 6.4 5.0 2005 2006 2007 2008 2009 2010 2011 2012 Longer Run 3.3 1.9 3.6 1.7 1.2 Upper End of Range 2.0 2.4 2.2 2.0 Upper End of Central Tendency 1.5 1.9 2.0 2.0 Actual Unemployment rate Percent Actual PCE inflation Percent Actual Upper End of Central Tendency 1.5 1.9 2.0 2.0 Lower End of Central Tendency 1.2 1.1 1.2 1.7 Lower End of Range 1.1 0.9 0.7 1.5 Core PCE inflation Percent 2005 2006 2007 2008 2009 2010 2011 2012 Actual 2.3 2.3 2.5 2.0 1.5 Upper End of Range 1.6 2.4 2.2 Upper End of Central Tendency 1.2 1.5 1.6 Lower End of Central Tendency 0.9 1.0 1.2 Lower End of Range 0.7 0.6 0.6 Note: Definitions of variables are in the notes to table 1. The data for the actual values of the variables are annual. Exhibit 2: Economic Projections for 20102012 and Longer Run Real GDP Growth 2010 Central Tendency 2011 2012 Longer Run 3.2 to 3.7 3.4 to 4.5 3.5 to 4.5 2.5 to 2.8 January projections 2.8 to 3.5 3.4 to 4.5 3.5 to 4.5 2.5 to 2.8 Range 2.7 to 4.0 3.0 to 4.6 2.8 to 5.0 2.4 to 3.0 January projections 2.3 to 4.0 2.7 to 4.7 3.0 to 5.0 2.4 to 3.0 Memo: Greenbook 4.4 4.7 2.5 3.6 4.7 4.5 2.5 2010 January Greenbook 3.5 2011 2012 Unemployment Rate Central Tendency Longer Run 9.1 to 9.5 8.1 to 8.5 6.6 to 7.5 5.0 to 5.3 9.5 to 9.7 8.2 to 8.5 6.6 to 7.5 5.0 to 5.2 8.6 to 9.7 7.2 to 8.7 6.4 to 7.7 5.0 to 6.3 January projections 8.6 to 10.0 7.2 to 8.8 6.1 to 7.6 4.9 to 6.3 January projections Range Memo: Greenbook 8.2 6.7 5.2 9.5 8.2 6.1 5.2 2010 January Greenbook 9.3 2011 2012 PCE Inflation Central Tendency Longer Run 1.2 to 1.5 1.1 to 1.9 1.2 to 2.0 1.7 to 2.0 January projections 1.4 to 1.7 1.1 to 2.0 1.3 to 2.0 1.7 to 2.0 Range 1.1 to 2.0 0.9 to 2.4 0.7 to 2.2 1.5 to 2.0 January projections 1.2 to 2.0 1.0 to 2.4 0.8 to 2.0 1.5 to 2.0 Memo: Greenbook 1.0 1.1 2.0 1.4 1.1 1.3 2.0 2010 January Greenbook 1.3 2011 2012 Core PCE Inflation Central Tendency 0.9 to 1.2 1.0 to 1.5 1.2 to 1.6 January projections 1.1 to 1.7 1.0 to 1.9 1.2 to 1.9 Range 0.7 to 1.6 0.6 to 2.4 0.6 to 2.2 January projections 1.0 to 2.0 0.9 to 2.4 0.8 to 2.0 Memo: Greenbook January Greenbook 0.9 0.9 1.1 1.2 1.1 1.2 NOTE: See Table 1 for variable definitions Exhibit 3. Risks and Uncertainty in Economic Projections Topleft panel Uncertainty about GDP Growth Number of participants Lower Similar Higher April projections 0 5 12 January projections 0 3 14 Topright panel Risks to GDP Growth Number of participants Downside Balanced Upside April projections 0 14 3 January projections 1 16 0 Bottomleft panel Uncertainty about PCE Inflation Number of participants Lower Similar Higher April projections 1 3 13 January projections 1 3 13 Bottomright panel Risks to PCE Inflation Number of participants Downside Balanced Upside April projections 2 13 2 January projections 1 14 2 Appendix 4: Materials used by Mr. Sheets Europe: Average Residual Maturity of Outstanding Government Debt Years Germany 6.0 Portugal 6.4 Spain 6.7 Ireland 6.8 France 6.8 Italy 7.1 Greece 7.6 United Kingdom 12.5 * Average residual maturity of marketable debt, as of April 15, 2010. In 2007, 98.5 percent of Greek debt issuance had maturity of at least 5 years. Appendix 5: Materials used by Mr. Sack Federal Reserve System Date: April 28, 2010 To: Federal Open Market Committee From: William English, Brian Madigan, and Brian Sack Subject: Redemption of Treasury Securities Under Alternative Approaches In yesterday's discussion of the redemption strategy for the Federal Reserve's holdings of Treasury securities, several FOMC members raised the possibility of running down our holdings of longerterm securities while continuing to reinvest in shorterterm issues. The table below summarizes the amount of redemptions achieved under several potential strategies along these lines. Cumulative Redemptions of Treasury Securities Under Alternative Approaches ($ Billions) 2010 Full Redemption Strategy 2011 2012 2013 60 130 268 330 Original Maturity of 3 Years or More 16 58 192 254 Original Maturity of 5 Years or More 12 46 105 158 Original Maturity of 7 Years or More 3 8 18 34 Redeem Holdings of Longerterm Securities Reinvest Maturing Holdings into Shortterm Instruments Invest in Bills at Auction 39 99 216 264 Invest in Bills and 2yr Notes at Auction 16 30 102 123 Invest in Bills, 2 and 3yr Notes at Auction 0 0 0 0 Invest in Bills in Secondary Market 0 0 0 0 All figures are yearend amounts assuming redemptions begin May 3. Appendix 6: Materials used by Chairman Bernanke Comparison of Taylor Rule Prescriptions Two line charts display the Taylor (1993) and Taylor (1999) policy rule prescriptions for the setting of the federal funds rate, from 2000 through 2010. In addition, the actual nominal federal funds rate is plotted in each of the figures. Top panel Inflation Measure: CPI or GDP Deflator In the first chart, two variants of each of these rule prescriptions are provided: one using the CPI inflation rate as the inflation measure, and one for which inflation is computed using the GDP deflator. The interest rate prescriptions initially are generally above the actual federal funds rate and take values of around 7 percent, then fall to around 2 percent by mid2002. The federal funds rate falls in 2001 and takes values below 2 percent over much of 2002 and 2003, slowly picking up from 2004 onward. The Taylor rule prescriptions rise in value more rapidly, reaching around 6 percent by the start of 2006. As the actual federal funds rate stabilizes for around a year at 5 percent, the Taylor rule prescriptions using CPI inflation drop sharply, then stabilize before rising to around 67 percent during 2008, thereafter falling to minus 6 percent and minus 10 percent for the 1993 and 1999 rule prescriptions, respectively. Using the GDP deflator inflation rate, the Taylor rule prescriptions move more closely with the actual federal funds rate, slowly decreasing to the effective lower bound by 2009 then dropping below the lower bound for the remainder of the period. Bottom panel Inflation Measure: Core CPI or Core PCE The second chart brings out the implications of using core PCE inflation and core CPI inflation as the inflation series in the computation of prescriptions from the two Taylor rules. The prescriptions using core inflation rates do not generally imply deviations from the actual federal funds rate as large as the Taylor rule prescriptions using the headline rates. The rule prescriptions using core instead tend to move closely with the federal funds rate. The general shape of the rule prescriptions' movements mirrors that seen in the previous figure. Prescribed values move from around 6 percent down to 2 percent by 2004, then rising to around 5 percent by 2007. The prescribed values from the rules then fall below the federal funds rate for a brief period; by 2008, however, the funds rate is decreasing more rapidly than the ruleprescribed values. The funds rate reaches its lower bound by the beginning of 2009, at which time the Taylor (1993) rule prescription is somewhat above the lower bound, and the Taylor (1999) rule prescription has dropped to around minus 5 to 6 percent. Page 2 Top panel The Unemployment Gap and the Commencement of Tightening A line chart plots two series: the realtime estimate of the unemployment gap and the revised (or ex post) estimate of the unemployment gap (unemployment minus the fullemployment rate of unemployment) over the period from 1980 to 2010. In addition, the figure shows three vertical lines corresponding to June 1983, February 1994, and June 2004, each of which roughly corresponds to a period in which a monetary policy tightening period began. For the first three years of the period, the realtime unemployment gap is not shown, leaving only the revised gap which increases from zero to its November 1982 maximum of 4.3 percent, which was then closed over the following five years. The realtime gap until the late 1980s is roughly a quarter percentage point wider than the revised gap. In 1990, both gaps widen again and the difference between the two series is minor over the next two years; both series reach a maximum of about 2.3 percent in June 1992. Both gaps then close, with the realtime gap declining more steeply for three years, being roughly zero at the time of the February 1994 tightening. The gaps then decrease more gradually for approximately five years; for 2000, both series imply unemployment was about 1 percent below the sustainable rate. Subsequently, they both show a steep rise, taking very similar values, reaching about 1.4 percent in June 2003, and then begin a more moderate decline until 2007 (being about 0.7 percent at the time of the 2004 tightening). The final three years are associated with a steep widening of the gaps, which stand at 4.9 percent in October 2009. Middle panel Net Changes in Nonfarm Payrolls Dates Millions Percent Nov. 1982 to June 1983 1.24 1.4 June 1992 to Feb. 1994 4.04 3.7 June 2003 to June 2004 1.60 1.2 Oct. 2009 to March 2010 0.12 0.1 Bottom panel The Recent Evolution of Consumer Prices and M2 (Annualized Changes through March 2010, in Percent) CPI Core CPI CPI ex. OER Core CPI ex. OER M2 3Month 0.9 0.2 1.5 0.1 1.5 6Month 1.7 0.6 2.4 1.1 1.3 12Month 2.3 1.1 3.1 1.6 1.5 Appendix 7: Materials used by Mr. English Material for FOMC Briefing on Monetary Policy Alternatives Bill English April 2728, 2010 Class I FOMC Restricted Controlled FR March FOMC Statement Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack continuing to restrain cost pressures and longerterm inflation expectations stable, inflation is likely to be subdued for some time. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgagebacked securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability. In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by newissue commercial mortgagebacked securities and on March 31 for loans backed by all other types of collateral. [Note: In the April FOMC Statement Alternatives, strong emphasis (bold) indicates bold red underlined text in the original document.] April FOMC StatementAlternative A Information received since the Federal Open Market Committee met in March suggests that economic activity has continued to strengthen and that the labor market is showing signs of improving. Although growth in household spending has picked up recently, it is likely to remain constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although longerterm inflation expectations have remained stable, recent data suggest inflation has been trending down in response to substantial resource slack. The Committee anticipates that inflation is likely to be quite subdued for some time. To promote a more robust economic recovery in a context of price stability, the Committee anticipates maintaining the target range for the federal funds rate at 0 to ¼ percent for an extended perioduntil economic conditions such as appreciably higher rates of resource utilization, increasing inflation pressures, or rising inflation expectations warrant a less accommodative monetary policy. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability. [To gradually reduce the size of the Federal Reserve's balance sheet and return it to a more normal composition over time, the Committee will maintain its approach of not reinvesting the proceeds of maturing agency debt and payments on mortgagebacked securities held by the System Open Market Account. The Committee is continuing to roll over maturing Treasury securities.] In light of improved functioning of financial markets, the Federal Reserve has closed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term AssetBacked Securities Loan Facility, is scheduled to close on June 30 for loans backed by newissue commercial mortgagebacked securities; it closed on March 31 for loans backed by all other types of collateral. April FOMC StatementAlternative B Information received since the Federal Open Market Committee met in March suggests that economic activity has continued to strengthen and that the labor market is beginning to improve. Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack continuing to restrain cost pressures and longerterm inflation expectations stable, inflation is likely to be subdued for some time. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability. [To gradually reduce the size of the Federal Reserve's balance sheet and return it to a more normal composition over time, the Committee will maintain its approach of not reinvesting the proceeds of maturing agency debt and payments on mortgagebacked securities held by the System Open Market Account. The Committee is continuing to roll over maturing Treasury securities. OR To gradually reduce the size of the Federal Reserve's balance sheet over time, the Committee will maintain its approach of not reinvesting the proceeds of maturing agency debt and payments on mortgagebacked securities held by the System Open Market Account. In addition, on May 3 the Committee will stop reinvesting the proceeds of maturing Treasury securities.] In light of improved functioning of financial markets, the Federal Reserve has closed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term AssetBacked Securities Loan Facility, is scheduled to close on June 30 for loans backed by newissue commercial mortgagebacked securities; it closed on March 31 for loans backed by all other types of collateral. April FOMC StatementAlternative C Information received since the Federal Open Market Committee met in March indicates that economic activity has continued to strengthen and that the labor market is improving. Though investment in nonresidential structures is declining, housing starts have edged up, growth in household spending has increased, and business spending on equipment and software has risen significantly. While bank lending continues to contract, financial market conditions have become more supportive of economic growth. With economic recovery under way, the Committee anticipates a gradual return to higher levels of resource utilization. Although energy prices have risen on balance in recent months, inflation has remained subdued. The Committee will adjust the stance of monetary policy as necessary over time to ensure that longerterm inflation expectations remain well anchored and that inflation outcomes are consistent with price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and now anticipates that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for some time. The Committee will maintain its approach of not reinvesting the proceeds of maturing agency debt and payments on mortgagebacked securities held by the System Open Market Account. In addition, on May 3 the Committee will stop reinvesting the proceeds of maturing Treasury securities. To further reduce the size of the Federal Reserve's balance sheet, and to return the balance sheet to a more normal composition, the Committee anticipates that it will soon begin gradual sales of agency debt and mortgagebacked securities. The timing and pace of such sales will depend on evolving economic and financial conditions. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability. In light of improved functioning of financial markets, the Federal Reserve has closed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term AssetBacked Securities Loan Facility, is scheduled to close on June 30 for loans backed by newissue commercial mortgagebacked securities; it closed on March 31 for loans backed by all other types of collateral. Table 1: Overview of Alternatives for the April 28 FOMC Statement March Statement April Alternatives A B C has continued to strengthen has continued to strengthen Economic Activity Recent Developments has continued to strengthen has continued to strengthen Labor Market Outlook is showing signs of improving; high unemployment; employers remain reluctant to add to payrolls recovery likely to be moderate for a time; gradual return to higher levels of resource utilization is beginning to improve; high unemployment; employers remain reluctant to add to payrolls is improving is stabilizing; high unemployment; employers remain reluctant to add to payrolls recovery likely to be moderate for a time; gradual return to higher levels of resource utilization recovery under way; gradual return to higher levels of resource utilization Inflation Recent Developments substantial slack is restraining cost pressures; stable inflation expectations stable inflation expectations but recent data suggest inflation is trending down in response to slack substantial slack is restraining cost pressures; stable inflation expectations energy prices have risen on balance in recent months but inflation remains subdued Outlook likely to be subdued for some time likely to be quite subdued for some time likely to be subdued for some time policy adjustments will ensure inflation outcomes consistent with price stability Federal Funds Rate Target Intermeeting Period Forward Guidance 0 to ¼ percent 0 to ¼ percent 0 to ¼ percent 0 to ¼ percent economic conditions are likely to warrant exceptionally low levels for an extended period anticipate maintaining the 0 to ¼ percent target range for an extended perioduntil economic conditions such as … warrant a less accommodative policy economic conditions are likely to warrant exceptionally low levels for an extended period economic conditions are likely to warrant exceptionally low levels for some time Reinvestment and Sales of SOMA Assets Approach [do not reinvest proceeds of agency debt and MBS but continue to roll over maturing Treasuries] [do not reinvest proceeds of agency debt and MBS but continue to roll over maturing Treasuries] OR [no reinvestment] no reinvestment; "Committee anticipates that it will soon begin gradual sales of agency debt and MBS" March 2010 FOMC 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 longrun 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 complete the execution of its purchases of about $1.25 trillion of agency MBS and of about $175 billion in housingrelated agency debt by the end of March. The Committee directs the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. [Note: In the April 2010 FOMC Directive Alternatives, strong emphasis (bold) indicates bold red underlined text in the original document.] April 2010 FOMC 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 longrun 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 engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. [To gradually reduce the size of the Federal Reserve's balance sheet and return it to a more normal composition over time, the Committee directs the Desk to not reinvest the proceeds of maturing agency debt and payments on mortgagebacked securities held by the System Open Market Account.] The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. April 2010 FOMC 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 longrun 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 engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. [To gradually reduce the size of the Federal Reserve's balance sheet and return it to a more normal composition over time, the Committee directs the Desk to not reinvest the proceeds of maturing agency debt and payments on mortgagebacked securities held by the System Open Market Account. OR To gradually reduce the size of the Federal Reserve's balance sheet over time, the Committee directs the Desk to not reinvest the proceeds of maturing Treasury and agency debt and payments on mortgagebacked securities held by the System Open Market Account.] The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. April 2010 FOMC 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 longrun 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 engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions. To gradually reduce the size of the Federal Reserve's balance sheet over time, the Committee directs the Desk to not reinvest the proceeds of maturing Treasury and agency debt and payments on mortgagebacked securities held by the System Open Market Account. 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. Return to top Home | Monetary policy | FOMC | FOMC transcripts Accessibility | Contact Us Last update: January 15, 2016
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