Full text of Federal Open Market Committee Meeting Minutes, Transcripts, and Other Documents : Meeting, June 14-15, 2016 : Presentation Materials

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June 14–15, 2016

Authorized for Public Release

Appendix 1: Materials used by Mr. Potter

163 of 201

June 14–15, 2016

Authorized for Public Release

Class II FOMC – Restricted (FR)

Material for the Briefing on

Financial Developments and
Open Market Operations

Simon Potter
June 14, 2016

164 of 201

June 14–15, 2016

Authorized for Public Release

165 of 201
Exhibit 1

Class II FOMC – Restricted (FR)

(1) Changes in Asset Prices
From Start
of Year to
02/11/16

(2) Market-Implied Probability of Rate Hike*

From
From April
02/11/16 to
FOMC to
April FOMC Current

Hike at or Before Dec. '15
Percent

100

2-Year Treasury Yield

-40 bps

+21 bps

-13 bps

10-Year Treasury Yield

-61 bps

+27 bps

-29 bps

U.S. Broad T.W. Dollar

+0.8 %

-3.8 %

+1.2 %

S&P 500 Index

-10.5 %

+14.4 %

+0.2 %

High-Yield OAS

+179 bps

-253 bps

-22 bps

+6 bps

-1 bps

+13 bps

MBS OAS*

80
60

-67

April

June

Percent

2.5

2.0

1.5

1.0

0.5

≤0.25%

0.260.50%

0.511.00%

1.011.50%

1.512.00%

2.012.50%

≥2.51%

*Based on all responses from the January, April, and June Surveys of Primary
Dealers and Market Participants.
Source: FRBNY

0.0
06/10/16

-27

-17

USD/Bbl.

Market-Implied: Before December FOMC
Market-Implied: Before April FOMC
Market-Implied: Current
January Survey Unconditional Path (Mean)
June Survey Unconditional Path (Mean)

01/10/17

08/10/17

03/10/18

1.5
a

-0.2
0.2
0.6
1.0
1.4
1.8
2.2
2.6
3.0
3.4
3.8

l
w
h…
Respondents
ss

PDF Bins
(Percent)

*Based on all responses from the June Surveys of Primary Dealers and Market
Participants. Blue series are market participants, red are primary dealers.
Source: FRBNY

2.00

55
50

1.80

1.60

40
35

1.40

30
25
07/01/15

Percent

2.20

0.5

10/10/18

Brent Crude Oil (LHS)
Five-Year, Five-Year Breakeven (RHS)

1.0

-7

(6) Brent Crude Oil and
Five-Year, Five-Year Breakeven

2.0
Probability Density

-37

Days Before Meeting

*Market-implied paths derived from federal funds and Eurodollar futures,
survey paths are the average PDF-implied means from the January and June
Surveys of Primary Dealers and Market Participants.
Source: Bloomberg, Desk Calculations

(5) Year-End 2017 Individual PDFs*

0.0

-47

(4) Implied Federal Funds Rate Path*

(3) Year-End 2016 Average Survey PDF*
January

-57

*Series start the day before two meetings prior, e.g. for Dec. ‘15 series starts
the day before the Sept. ‘15 FOMC Meeting.
Source: Bloomberg, Desk Calculations

*Current coupon Fannie Mae 30-Year.
Source: Barclays, Bloomberg, Federal Reserve Board of Governors

Percent

Hike at or Before Jul. '16

10/01/15

01/01/16

04/01/16

Source: Bloomberg, Federal Reserve Board of Governors

1.20

June 14–15, 2016

Authorized for Public Release

166 of 201
Exhibit 2

Class II FOMC – Restricted (FR)

(7) Five-Year, Five-Year Inflation Swaps Since 2011*
Average
Before April FOMC
Current

Percent

4.0
3.5

(8) Five-Year, Five-Year Nominal Rates Since 2011*
Average
Before April FOMC
Current

Percent

6.5
5.5

3.0

4.5

2.5
2.0

3.5

1.5

2.5

1.0

1.5

0.5

0.0

U.S.

-0.5

Japan

Euro Area

U.K.

*Boxed blue ranges show the 25th to 75th percentiles and whiskers illustrate the
maximum and minimum levels since 2011.
Source: Barclays

-0.5

Standard
Deviations

Jan. 4th

Feb. 11th

-1

(10) Changes in Currency Pair Implied Volatility*

04/10/16

*Standardized 1-month implied volatilities since June 1994. Updated as of
9:30 A.M. on 06/14/16.
**Swaption with 10-year underlying.
Source: Barclays, Bloomberg, CBOE, Deutsche Bank, Desk Calculations

FTSE: 2016 High Level (2/11/16)
FTSE 100
EuroStoxx
S&P 500

Indexed to
12/31/15

98
97

5
09/01/16

12/01/16

03/01/17

*At-the-money options. Updated as of 9:30 A.M. on 06/14/16.
Source: Bloomberg, Desk Calculations

06/01/17

PPTS

CNY-USD

CFETS Index*

101
100

(12) Chinese Exchange Rate

0
06/01/16

Since April FOMC

*1-month, at-the-money options. Updated as of 9:30 A.M. on 06/14/16.
Source: Bloomberg

(11) Equity Implied Forward Volatility*

PPTS

U.K.

AUD-USD
USD-CAD
USD-JPY
EUR-CHF
USD-CHF
EUR-USD
EUR-JPY
EUR-GBP
GBP-USD

12/10/15

Euro Area

Change YTD

-2
08/10/15

Japan

*Boxed blue ranges show the 25th to 75th percentiles and whiskers illustrate the
maximum and minimum levels since 2011.
Source: Bloomberg

(9) Standardized Implied Volatility Indices*
U.S. Equities
Developed Market Currencies
U.S. Long Rates**

U.S.

95
12/31/15

CNY
Depreciation
02/29/16

04/30/16

*RMB exchange rate against a basket of 13 currencies.
Computed from central parity rates for all currencies traded on CFETS.
Source: Bloomberg, Desk Calculations

June 14–15, 2016

Authorized for Public Release

167 of 201
Exhibit 3

Class II FOMC – Restricted (FR)

(13) Money Market Rates*

(14) Share of ON Treasury Tri-party Trades Below
ON RRP Offering Rate*

EFFR
GCF
Tri-Party Ex. GCF and RRP**

BPS

Not Fed RRP Counterparty
Fed RRP Counterparty

Percent

1.25
1.00

25 0.50

0
11/01/15

0.75

0.25
01/01/16

*Dashed lines indicate quarter-ends.
**Excludes intra-bank transactions.
Source: FRBNY

03/01/16

05/01/16

0.00
01/01/16 02/01/16 03/01/16 04/01/16 05/01/16 06/01/16
*Tri-party volumes exclude GCF and intra-bank transactions.
Source: Desk Calculations, FRBNY

(15) Money Fund Migration Survey Results*
$Billions

Prime
Outflow

Average

Gov't
Inflow

Securities

Repo

Fed RRP

Gov't Asset Allocation
*For gov’t inflow and allocation, survey responses given in percent; these
values calculated based on respondents' prime outflow estimates. Boxed ranges
show the 25th to 75th percentiles and whiskers illustrate the maximum and
minimum values.
Source: Desk Calculations, FRBNY

(17) Timing of and Fed Funds Rate at Change
in Reinvestment Policy*

Months
Ahead

20
16
12
8
4
0

Dec. Flash

June

≥ 2.75
2.50
2.25
2.00
1.75
1.50
1.25
1.00
0.75
0.50
0.25
0.00

Pre-liftoff**
December FOMC to March FOMC
March FOMC to June FOMC

300
250

y = -1.1x + 357
R² = 0.52

200
150
100
50
0

150

175

200

225

250

Tri-party ($ Billions)

275

300

*Excludes quarter-end dates. Tri-party volumes exclude GCF and intra-bank
transactions.
**June 2015 FOMC to December 2015 FOMC.
Source: FRBNY

(18) Contingency Plan for Maintaining Par Value of
Treasury Portfolio
• If unable to roll over maturing Treasuries at auction,
Desk has no authority to make secondary market
purchases

Percent

≥ 24

ON RRP Bids ($ Billions)

800
700
600
500
400
300
200
100
0

(16) ON RRP Usage vs. ON Treasury
Tri-party Volumes*

• Inability to roll over could be caused by technical or
operational issues, errors, or change to auction calendar
o February 25, 2016: 7-year auction rescheduled
for the next day

Dec. Flash

June

*Dots scaled by percent of respondents from the June and Dec. Flash Surveys
of Primary Dealers and Market Participants. Red dot is median. If timing of
policy change differs between Treasury and MBS, earlier is taken.
Source: FRBNY

• With proper authorization, Desk could make purchases
in secondary market to maintain SOMA size
• Desk to prepare procedures to seek authorization

June 14–15, 2016

Authorized for Public Release

168 of 201
Appendix (Last)

Class II FOMC – Restricted (FR)

Appendix: Summary of Operational Testing
Summary of Operational Tests in prior period:
• Domestic Authorization
o May 24: Outright Treasury sale for $200 million
o May 25: Overnight repo for $610 million
o May 25: Outright MBS Sale (specified pool) for approximately $99 million
o June 1: Outright MBS Sale (basket) for approximately $30 million
• Foreign Authorization
o June 7: Liquidity swap with the Bank of Canada for CAD51 thousand
• TDF test operation
o May 19: Conducted 7-day test with total take-up of $67 billion
Upcoming Operational Tests
• No tests under the Domestic Authorization
• One test scheduled under the Foreign Authorization
• July 12: Euro-denominated overnight repo for approximately €1 million

June 14–15, 2016

Authorized for Public Release

Appendix 2: Materials used by Messrs. Rudd and Ahmed

169 of 201

June 14–15, 2016

Authorized for Public Release

170 of 201

Class II FOMC – Restricted (FR)

Material for

Staff Presentation on the Economic and Financial
Situation

Jeremy Rudd and Shaghil Ahmed
June 14, 2016

June 14–15, 2016

Authorized for Public Release

171 of 201

Class II FOMC - Restricted (FR)

Exhibit 1

Staff Projection
2. Evolution of 2016:Q2
GDP Growth Nowcasts

1. Near-Term Outlook
(Quarterly percent changes or percentage point
contributions at annual rate)

Judgmental (Tealbook-consistent)
Board staff factor model
Other System models

Q1e

Q2f

H2f

1.2
0.4

1.9
2.2

2.3
2.7

4
3

-0.1
0.1
0.1
-0.3
0.2
-0.1
0.8

0.0
0.2
0.0
-0.2
-0.2
-0.3
0.1

-0.6
-0.2
-0.3
-0.1
-0.1
0.1
0.2

-1

1. Real GDP
2.
April TB
Contributions to revision:
3. PDFP
4. PCE
5. RES
6. E&I + NRS
7. Inventory investment
8. Government
9. Net exports

Percent, annual rate

2016

-2

e: Staff estimate. f: Staff forecast.

Apr.

May

June

5
4

-2

Note: The shaded region is a 70 percent confidence interval around
the Board staff factor model estimate.

4. Sources of GDP Revisions Since
December

3. Real GDP
Percent change, annual rate

June TB
Dec. TB
70% confidence interval

Factors revising down 2016-2018 GDP growth:

-2

Incoming domestic spending data
(PCE, E&I) and our reaction to it.
Factors revising up 2016-2018 GDP growth:
Incoming external-sector data and our
reaction to it.
More-supportive financial conditions.

-4

2014

2015

2016

2017

2018

-4

Note: Confidence intervals for panels 3 and 6 are based on FRB/US
stochastic simulations.

5. Total Payroll Employment*

6. Unemployment Rate
Thousands

400

June TB
Dec. TB

Percent

June TB
Dec. TB
70% confidence interval

300

200

100

Natural rate (staff estimate)

3
0

2014

2015

2016

2017

2018

* Average monthly change in quarter shown.

Page 1 of 9

3
2014

2015

2016

2017

2018

June 14–15, 2016

Authorized for Public Release

172 of 201

Class II FOMC - Restricted (FR)

Exhibit 2

Perspectives on Labor Market Slack
1. Labor Force Participation Rate*

2. Employment-to-Population Ratio*
Percent

66.5

Labor force participation rate
Trend**

66.0

66.5

Percent

63.5

Employment-to-population ratio
Trend**

66.0
62.5

65.5

65.0

64.5

64.0

63.5

63.0

62.5

61.5

60.5

59.5

May

58.5
62.5
62.0

May
2008

2010

2012

2014

2016

59.5
58.5

62.5
62.0

57.5

2008

2010

2012

2014

2016

57.5

*Published data adjusted by staff to account for changes in
population weights. **Staff estimate including the effect of
extended unemployment benefits.

*Published data adjusted by staff to account for changes in
population weights. **Staff estimate.

3. Part-Time for Economic Reasons

4. Alternative Measures of Labor Market Slack

Percent of employed

Actual
Predicted

Percentage points

Unemployment rate gap
Job availability (Conference Board)
Jobs hard-to-fill (NFIB survey)

6
5
4

-1

-2

0
1990

63.5

1994

1998

2002

2006

2010

2014

-3
1990

1994

1998

2002

2006

2010

2014

-3

Note: Shaded bars indicate a period of business recession as defined
by the NBER. Series adjusted for CPS redesign; 2016:Q2 is
April-May average.

Note: Shaded bars indicate a period of business recession as defined
by the NBER. Indexes normalized to have same mean and standard
deviation as staff unemployment rate gap.

5. Unemployment Rates by Group

6. Part-Time for Economic Reasons by Group
Percent

Percent

Black or African-American
Hispanic or Latino
Total
White

May
0

2000 2002 2004 2006 2008 2010 2012 2014 2016

Note: Shaded bars indicate a period of business recession as defined
by the NBER.

2000 2002 2004 2006 2008 2010 2012 2014 2016

Note: Shaded bars indicate a period of business recession as defined
by the NBER. Data are not seasonally adjusted and cover workers
who are usually part time only; 2016:Q2 is April-May average.

Page 2 of 9

June 14–15, 2016

Authorized for Public Release

173 of 201

Class II FOMC - Restricted (FR)

Exhibit 3

Additional Perspectives on Slack
1. Stylized Steep Phillips Curve

2. Stylized Flat Phillips Curve

Detrended inflation

-1

Greater than
zero 17%
of the time

-1
Less than
zero 17%
of the time

-2
-3
-4

-3

-2

-1

-2

-3

-4

-1

-3

-2

Percent
Staff output gap
Range of three model estimates

-1

-4

-8

2004

2007

2010

Staff estimate*
Range of three model estimates
Unemployment rate

2001

Percent

1998

-3
-4

4. Natural Rate of Unemployment Estimates
from Statistical Models

-12

-2

Unemployment gap

3. Output Gap Estimates from Statistical Models

Less than
zero 50%
of the time

Unemployment gap

Greater than
zero 42%
of the time

2013

2016

-12

12
11
10

1998

2001

2004

2007

2010

2013

2016

* Includes EEB effects.

6. Short-Run Real Natural Rate of Interest
Estimates from DSGE Models

5. Output Gap Estimates from DSGE Models
Percent

Staff output gap
EDO
PRISM
FRB NY model

Percent, annual rate

Median estimate
Range of model estimates

-4

-8

-12

1998

2001

2004

2007

2010

2013

2016

8
2016:Q1

2007

Page 3 of 9

2009

2011

2013

2015

2017

-12

June 14–15, 2016

Authorized for Public Release

174 of 201

Class II FOMC - Restricted (FR)

Exhibit 4

Inflation
1. Inflation Revisions Since December:
Total PCE
Percentage points
Source of Revision:
Food
Energy
Core

Revision to projection

2. Inflation Revisions Since December:
Core PCE
Percentage points

0.7
Revision to projection

0.5
0.3

2015

2016

2017

Percent
Michigan, next 5 to 10 years (median)
Estimated trend
Trend augmented with CPI food and energy inflation

-0.1

-0.3

-0.5

2015

3.0

2.5

2001

2004

2007

2010

2013

2016

2.0

Percent change from year earlier
Avg. hourly earnings*
ECI
Prod. & Costs

4.0

3.5

4
3

May
Mar.

2017

0.9 (0.7 - 1.0)
2.0 (1.3 - 2.7)

5. Stock-Watson
6. Cogley-Sargent

1.9
1.8

1.6 (1.4 - 1.8)
1.6 (1.3 - 1.9)

7. Mertens (2011)
8. Nalewaik (2015)

2.2
1.9

1.8 (1.7 - 2.0)
1.8 (1.7 - 2.0)

Four-quarter log change, percent
Actual inflation
Baseline plus unemployment gap
Baseline plus unemployment gap and ECI TULC

4.0
3.5

1.5

1.0

1.0
0.5

0.0

2015

2.1
1.9

2.0

-1

2013

3. Phillips curve (TIPS)
4. TVP/SV VAR

2.0

0.5

2011

1.6 (1.5 - 1.8)
1.6 (1.5 - 1.7)

2.5

0
2009

1.9
1.7

2.5

0
2007

1. Phillips curve (Michigan)
2. Phillips curve (SPF)

3.0

* All employees.

-0.7

3.0

-1

2018

6. VAR Decomposition of Core Market-Based
Inflation

5. Measures of Labor Compensation

2017

Note: Model 8 based on total PCE prices. "Range" gives 70 percent
confidence interval or credible set.

Note: Shaded area denotes 70 percent of the observed historical
range since 1998. Augmented trend uses staff forecasts for May and
June CPIs. June Michigan survey value is preliminary.

2016

(Percent change, annual rate)
2007:Q4
2016:Q1
Est.
Est. Range

4.0

3.5

1998

0.3

4. Indicators of Underlying Core PCE Inflation

3.5

2.0

0.5

0.1

3. Longer-Term Inflation Expectations
4.0

0.7

0.1

-0.7

2018

Source of Revision:
Resource utilization
Energy passthrough
Import passthrough
Underlying inflation
Other

2001 2003 2005 2007 2009 2011 2013 2015
Note: The red lines show the estimated effects of the specified
structural shocks on core inflation.

Page 4 of 9

0.0

June 14–15, 2016

Authorized for Public Release

175 of 201

Class II FOMC - Restricted (FR)

Exhibit 5

Foreign Outlook
1. Real GDP*

Percent change, annual rate
2015
Q4

1. Total Foreign
April Tealbook
March Tealbook
2. AFEs
3. Canada
4. Japan
5. Euro Area
6. United Kingdom
7. EMEs
8. China
9. Em. Asia ex. China
10. Mexico

2017f

2. Foreign Growth
Percent change, annual rate

2018f

2016
Q2f

H2f

1.5
1.7
1.7

2.5
2.4
2.1

1.8
2.2
2.3

2.8
2.6
2.6

2.8
2.8
2.7

2.8
2.7
2.8

0.9

2.2

0.7

2.3

2.1

1.9

0.5
-1.8
1.7
2.4

2.4
1.9
2.2
1.4

-0.0
-0.4
1.5
1.4

3.0
1.2
1.7
2.3

2.4
0.9
1.9
2.4

1.9
0.8
1.9
2.2

2.1

2.8

3.2

3.5

3.6

7.1
2.6
2.2

5.8
2.7
3.3

6.7
3.5
2.4

6.6
3.7
2.5

6.1
3.8
2.8

5.8
3.8
2.9

3.0

Current
April TB

2.5
2.0
1.5
1.0
0.5
0.0
Q1

* GDP aggregates weighted by shares of U.S. merchandise exports. f: Staff forecast.

4. Policy Accommodation

3. Consumer Prices
Four-quarter percent change

6
5

EME headline CPI

ECB policy remains very accommodative
and its balance sheet will expand further.

BOJ to ease further, and consumption
tax hike postponed to 2019.

3
AFE headline CPI*

Policy rates in Canada and U.K. not
expected to rise until next year.

2
1
AFE core CPI*
0
2011 2012 2013 2014 2015 2016 2017 2018

* Excluding the effects of Japanese consumption tax hikes.

5. Labor Productivity

6. Potential Growth
Percent change

Four-quarter percent change

June 2010 TB
EME

5
EME**

AFE*

2
AFE

-1
2001

2003

2005

2007

2009

2011

*Total Economy Database. **Penn World Tables,
U.N. population projections, and staff calculations.

2013

2015

-1
2001

Page 5 of 9

2004

2007

2010

2013

2016

June 14–15, 2016

Authorized for Public Release

176 of 201

Class II FOMC - Restricted (FR)

Exhibit 6

Risks
2. RMB Exchange Rate

1. Oil Prices
Dollars per barrel

120

100

110

100

Brent spot

2014

2015

2016

2017

Onshore
(CNY)

6.2

6.4

96
95
94

April Tealbook

RMB/USD (inverted scale)

6.3

70
60

Aug. 3, 2015 = 100

6.5

Chinese nominal
exchange rate
basket*

6.6
6.7

Renminbi
appreciation

6.8
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

2018

2015
2016
* CFETS, FRB, and staff calculations.

3. Brexit

4. U.S. Real GDP
Four-quarter percent change

3.0

Baseline
Moderate Brexit
Disorderly Brexit

Two scenarios using SIGMA model:
- Moderate: Relatively muted reaction of
global financial markets.
- Disorderly: Greater spillovers to
global financial markets.

2.5

Effect on U.S. GDP:
- Moderate: ¼ ppt. hit to growth.
- Disorderly: Larger negative effect.

2.0

1.5
2014

5. Federal Funds Rate
Percent, annual rate

Baseline
Moderate Brexit
Disorderly Brexit

3.0
2.5
2.0
1.5
1.0
0.5
0.0

2014

2015

2016

2017

2018
Page 6 of 9

2015

2016

2017

2018

June 14–15, 2016

Authorized for Public Release

177 of 201

Class II FOMC - Restricted (FR)

Exhibit 7

U.S. Monetary Policy Normalization: EME Spillovers
1. EME Vulnerabilities
1400

Basis points

Score

1200
1000

3
EME Vulnerability Index (13 EMEs)*

800
600

400
200

EMBI global spread**
1

0
1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

*Staff calculations: Based on 6 indicators for 13 EMEs: CA/GDP, gross government debt/GDP, average inflation, increase in bank credit to the
private sector/GDP, reserves/GDP, and total external debt/exports. **Before 1998, backcasted using EMBI+ and Brady Bond spreads.

2. Private Non-Financial Sector Credit

3. Reaction to FOMC Announcements

Percent of GDP
Change from 2007:Q4 to 2015:Q4

Basis points

120

2-day change in EMBIG

Feb. 1998 - Apr. 2016
100

Non-financial corporations
Households

80
60

Asian Financial Crisis**

Mexico ’94

25
0
-25
slope = 0.44
(t = 2.4)

-50

20
-60

0
Mexico
Malaysia
Korea
Singapore
China*
Indonesia
Russia
Brazil
Turkey
EMEs
Source: BIS. *Including Hong Kong. **Singapore, Malaysia, Indonesia, & Korea.
Horizontal lines denote credit growth over 8 years preceding each crisis.

-75
-50 -40 -30 -20 -10
0
10
20
30
Change in front-month fed futures* (basis points)

* Futures changes computed over a narrow window around FOMC
announcements. Adjusted using Kuttner’s (2001) method.

4. EME Growth Model

5. EME Growth with EMBIG Surge

EME growth = f(AE growth, EMBIG spread)

Percent, annual rate

Actual

Percent, annual rate

10
8

Predicted
6

Baseline

2
Alternative*

Long-run effects:
100 bps increase
in EMBIG spread

-0.25*

1 ppt increase
in AE growth

0.88**

-2

-4

-6

-8
1995

2000

2005

2010

**, * denotes significance at 1 percent and 2 percent levels, respectively.

2015

Page 7 of 9

-8
2014

2015

2016

2017

2018

* EMBI global spreads rise 250 bps, stay elevated
through 2017, and gradually decline to current
levels by end-2018.

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Class II FOMC - Restricted (FR)

Exhibit 8

U.S. External Sector
1. Real Dollar Indexes

2. Expected Policy Rates
2014:Q1 = 100

Percent

130

April 2016 TB

Staff
Market*

125
Dollar
appreciation

AFE

3.5
3.0
2.5

120

2.0

Broad

115
United States

1.5

110
1.0
EME

105

0.5
AFE

100
95
2014

2015

2016

2017

2018

* Based on OIS swaps.

Percent
Feb. 1995 - Apr. 2014
1-day change in major dollar index

-0.5
2016

3. Reaction to FOMC Announcements

0.0

2017

2018

4. Core Import Price Deflator
Percent change, annual rate

Jun. 2014 - Apr. 2016

4
2
1

-1

slope = 1.5
(all obs.)

-2

-2
-4
-3

slope = 22.1
(pink obs.)

-0.6

-0.45

-0.3

Dollar
appreciation
-0.15

0.15

-6

-4

-5
0.3

Change in front-month fed futures* (percentage points)
* Futures changes computed over a narrow window around FOMC
announcements. Adjusted using Kuttner’s (2001) method.

-8
2014

2015

2016

2017

2018

5. Trade in Real Goods and Services
2014

2015

2017f

2018f

-0.4
-0.6

-0.3
-0.4

-0.1
-0.2

2016
Q1e

Q2f

H2f

Contribution to Real GDP Growth (percentage points, annual rate)
1. Net Exports
-0.5
-0.5
0.1
-0.3
April Tealbook
-0.7
-0.4
Growth Rates (percent, annual rate)
2. Imports
5.4
April Tealbook
3. Exports
April Tealbook

2.4

2.9

-0.6
4.0

2.5
3.8

4.6
6.0

4.1
4.8

3.8
3.9

-0.6

0.3
-0.9

0.3
1.5

2.7
2.6

2.5
2.7

3.7
3.8

e: Staff estimate. f: Staff forecast.

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Appendix Exhibit

Key Economic Indicators for the June, July, and September FOMC Meetings
(Percent change at annual rate, except as noted)

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ 2016 ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
Mar.
Apr.
May
June
July
Aug.
Sept.
Total PCE price index
3‐month change
April Tealbook

0.4
0.2

1.1
0.9

2.2
1.5

2.7
1.6

1.9

1.4

1.1

12‐month change
April Tealbook

0.8
0.8

1.1
1.0

1.0
0.7

0.9
0.6

0.9

1.0

1.2

3‐month change
April Tealbook

2.2
1.9

1.7
1.5

1.4
1.3

1.6
1.6

1.4

1.3

1.2

12‐month change
April Tealbook

1.6
1.5

1.6

1.5

Unemployment rate (percent)
April Tealbook

5.0
5.0

5.0
4.9

4.7
4.9

4.8
4.9

4.8

Payroll employment (change in 000s)
April Tealbook

186
215

123
202

38
202

185
202

155

Core PCE price index

3rd Q4 est.
1.4
1.4

Gross Domestic Product
April Tealbook

2nd Q1 est. 3rd Q1 est.
1.2
1.2
0.4
0.4

2nd Q2 est. 3rd Q2 est.
1.9
1.9
2.2
2.2

Key : Estimate first available at:
June meeting

July meeting

September meeting

Note: The June CPI will be released prior to the July FOMC meeting; the August CPI will be released prior to the September meeting.

Page 9 of 9

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Appendix 3: Materials used by Mr. Wu

180 of 201

June 14–15, 2016

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Material for Briefing on the

Summary of Economic Projections

Jason Wu

June 14, 2016

181 of 201

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182 of 201

Exhibit 1. Medians, central tendencies, and ranges of economic projections, 2016–18 and over the longer run
Percent

Change in real GDP
Median of projections
Central tendency of projections
Range of projections

Actual

2011

2012

2013

2014

2015

2016

2017

2018

Longer
run
Percent

Unemployment rate

9
8
7
6
5
4

2011

2012

2013

2014

2015

2016

2017

2018

Longer
run
Percent

PCE inflation
3

2011

2012

2013

2014

2015

2016

2017

2018

Longer
run
Percent

Core PCE inflation
3

2011

2012

2013

2014

2015

2016

2017

2018

Longer
run

Note: The data for the actual values of the variables are annual. The percent changes in real GDP and inflation
are measured Q4/Q4. Projections for the unemployment rate are for the average civilian unemployment rate in the
fourth quarter of the year indicated. One participant did not submit longer-run projections.

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Exhibit 2. Economic projections for 2016–18 and over the longer run (percent)

Change in real GDP
2016
Median . . . . . . . . . . . . . . . . . . .
2.0
March projection . . . . . .
2.2
Range . . . . . . . . . . . . . . . . . . . . . 1.8 – 2.2
March projection . . . . . . 1.9 – 2.5
Memo: Tealbook . . . . . . . . . .
1.9
March projection . . . . . .
2.2

2017

2018

2.0
2.1
1.6 – 2.4
1.7 – 2.3
2.4
2.2

2.0
2.0
1.5 – 2.2
1.8 – 2.3
2.1
2.0

Longer
run
2.0
2.0
1.6 – 2.4
1.8 – 2.4
1.9
1.9

Unemployment rate
2016
Median . . . . . . . . . . . . . . . . . . .
4.7
March projection . . . . . .
4.7
Range . . . . . . . . . . . . . . . . . . . . . 4.5 – 4.9
March projection . . . . . . 4.5 – 4.9
Memo: Tealbook . . . . . . . . . .
4.8
March projection . . . . . .
4.8

2017

2018

4.6
4.6
4.3 – 4.8
4.3 – 4.9
4.5
4.5

4.6
4.5
4.3 – 5.0
4.3 – 5.0
4.3
4.3

Longer
run
4.8
4.8
4.6 – 5.0
4.7 – 5.8
5.0
5.0

PCE inflation
2016
Median . . . . . . . . . . . . . . . . . . .
1.4
March projection . . . . . .
1.2
Range . . . . . . . . . . . . . . . . . . . . . 1.3 – 2.0
March projection . . . . . . 1.0 – 1.6
Memo: Tealbook . . . . . . . . . .
1.3
March projection . . . . . .
1.0

2017

2018

1.9
1.9
1.6 – 2.0
1.6 – 2.0
1.7
1.6

2.0
2.0
1.8 – 2.1
1.8 – 2.0
1.8
1.8

Longer
run
2.0
2.0
2.0
2.0
2.0
2.0

Core PCE inflation
2016
Median . . . . . . . . . . . . . . . . . . .
1.7
March projection . . . . . .
1.6
Range . . . . . . . . . . . . . . . . . . . . . 1.3 – 2.0
March projection . . . . . . 1.4 – 2.1
Memo: Tealbook . . . . . . . . . .
1.6
March projection . . . . . .
1.4

2017

2018

1.9
1.8
1.6 – 2.0
1.6 – 2.0
1.6
1.6

2.0
2.0
1.8 – 2.1
1.8 – 2.0
1.8
1.8

* The percent changes in real GDP and inflation are measured Q4/Q4. Projections for the unemployment rate are
for the average civilian unemployment rate in the fourth quarter of the year indicated. One participant did not submit
longer-run projections in conjunction with the June 2016 meeting.

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Exhibit 3. Overview of FOMC participants’ assessments of appropriate monetary policy
Percent

June projections
Target federal funds rate or midpoint of target range at year-end

5.0

June projections
Median prescription based on Taylor (1999) rule
Median of projections

4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

2016

2017

2018

Longer run

Percent

March projections
Target federal funds rate or midpoint of target range at year-end

5.0

March projections
Median prescription based on Taylor (1999) rule
Median of projections

4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

2016

2017

2018

Longer run

Note: In the two panels above, each circle indicates the value (rounded to the nearest 1/8 percentage point) of
an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the
appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. The
red diamonds for each year represent the median of the federal funds rate prescriptions that were derived by taking each
participant’s projections for the unemployment gap, core PCE inflation and longer-run nominal federal funds rate for
that year and inserting them into the non-inertial Taylor (1999) rule. The whiskers represent the central tendency of
the prescriptions of the non-intertial Taylor (1999) rule using participants’ projections. One participant did not submit
longer-run projections in conjunction with the June 2016 meeting.

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Exhibit 4. Uncertainty and risks in economic projections

Number of participants

Uncertainty about GDP growth

Risks to GDP growth

June projections
March projections

Lower

Number of participants

June projections
March projections

18
16
14
12
10
8
6
4
2

Broadly
similar

Higher

Weighted to
downside

18
16
14
12
10
8
6
4
2

Broadly
balanced

Number of participants

Uncertainty about the unemployment rate

Weighted to
upside
Number of participants

Risks to the unemployment rate
18
16
14
12
10
8
6
4
2

Lower

Broadly
similar

18
16
14
12
10
8
6
4
2

Higher

Weighted to
downside

Broadly
balanced

Number of participants

Uncertainty about PCE inflation

Weighted to
upside
Number of participants

Risks to PCE inflation
18
16
14
12
10
8
6
4
2

Lower

Broadly
similar

18
16
14
12
10
8
6
4
2

Higher

Weighted to
downside

Broadly
balanced

Number of participants

Uncertainty about core PCE inflation

Weighted to
upside
Number of participants

Risks to core PCE inflation
18
16
14
12
10
8
6
4
2

Lower

Broadly
similar

Higher

18
16
14
12
10
8
6
4
2

Weighted to
downside

Page 4 of 5

Broadly
balanced

Weighted to
upside

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Exhibit 5. History of Taylor (1999) rule residuals and assessments of risks in economic projections
Percent

Net fraction

2016 Median Taylor (1999) residuals (left axis)
Risks to inflation weighted to the downside (right axis)

−1.0

0.1

−1.2

0.2

−1.4

0.3

−1.6

0.4

−1.8

0.5

−2.0

0.6

Sep. 2013

Dec. 2013 Mar. 2014 Jun. 2014

Sep. 2014

Dec. 2014 Mar. 2015 Jun. 2015

Sep. 2015

Percent

Dec. 2015 Mar. 2016 Jun. 2016
Net fraction

2017 Median Taylor (1999) residuals (left axis)
Risks to inflation weighted to the downside (right axis)

−0.4

0.1

−0.6

0.2

−0.8

0.3

−1.0

0.4

−1.2

0.5

−1.4

0.6

−1.6

Sep. 2013

Dec. 2013 Mar. 2014 Jun. 2014

Sep. 2014

Dec. 2014 Mar. 2015 Jun. 2015

Sep. 2015

Percent

Dec. 2015 Mar. 2016 Jun. 2016
Net fraction

2016 Median Taylor (1999) residuals (left axis)
Risks to the unemployment rate weighted to the upside (right axis)

−1.0

−0.2

−1.2

−0.1

−1.4

0.0

−1.6

0.1

−1.8

0.2

−2.0

0.3

Sep. 2013

Dec. 2013 Mar. 2014 Jun. 2014

Sep. 2014

Dec. 2014 Mar. 2015 Jun. 2015

Sep. 2015

Percent

−0.4

Dec. 2015 Mar. 2016 Jun. 2016
Net fraction

2017 Median Taylor (1999) residuals (left axis)
Risks to the unemployment rate weighted to the upside (right axis)

−0.2

−0.6

−0.1

−0.8

0.0

−1.0

0.1

−1.2

0.2

−1.4

0.3

−1.6

Sep. 2013

Dec. 2013 Mar. 2014 Jun. 2014

Sep. 2014

Dec. 2014 Mar. 2015 Jun. 2015

Sep. 2015

Dec. 2015 Mar. 2016 Jun. 2016

Note: Taylor (1999) rule residuals are calculated as the projections of individual participants for the appropriate
level of the federal funds rates minus the prescriptions from a non-inertial Taylor (1999) rule that uses as inputs
projections for the unemployment gap, core PCE inflation, and longer-run nominal federal funds rate. The blue lines
show, for each SEP date, the median of the residuals across individual participants.

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Appendix 4: Materials used by Mr. Laubach

187 of 201

June 14–15, 2016

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Material for the Briefing on

Monetary Policy Alternatives

Thomas Laubach
June 15, 2016

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Class I FOMC – Restricted Controlled (FR)

Exhibit 1: The Surprising Decline in Longer−Term Treasury Yields
Blue Chip Projections for the 10−year Treasury Yield
Percent
June 2016
June 2015
June 2014
June 2013

Blue Chip Projections for the Fed Funds Rate
Percent

6
June 2016
June 2015
June 2014
June 2013

5
4

4
3

Note: Shaded area represents current forecast period.
Source: Blue Chip Financial Forecast Survey.

10−Year Nominal Term Premium

−1

2013 2014 2015 2016 2017 2018 2019 2020

−1

Note: Shaded area represents current forecast period.
Source: Blue Chip Financial Forecast Survey.

Basis Points

Kim−Wright
Blue Chip

Inflation(CPI) Expectations

Percent

200
Model: 5−Year to 10−Year
Michigan Survey
Blue Chip Survey

150

3.8

3.4

100
50

3.0

0
2.6

−50
−100

2.2
−150
2010

2011

2012

2013

2014

2015

2016

−200

Note: Nominal term premium estimates implied by Blue Chip surveys
and by the staff’s three−factor model at the ten−year horizon.
Source: Blue Chip surveys and staff calculations.

Decomposition of Yield Changes,
6/1/2014 to 6/1/2016

10−Year Yield
Total Change (basis points)

Basis Points

2010

2013

2014

2015

2016

5−Y, 5−Y−Forward

−71

−127

−20

−52

Real rate expectations

−11

−44

Inflation expectations

−9

−8

−51

−75

Real rate risk premium

−8

−28

Inflation risk premium

−43

−48

Nominal Term Premium

2012

Policy Implications

Policy path consistent with
objectives is uncertain

Contribution from:
Expected Nominal Rate

2011

1.8

Note: Model refers to the staff’s four−factor model by D’Amico, Kim,
and Wei. The Blue Chip surveys use the long−term CPI forecasts of both the
Economic Indicators and Financial Forecasts Survey.
Source: Michigan Survey, Blue Chip surveys, and staff calculations.

Thus, important to communicate
that the path
will depend on "realized and expected
conditions" relative to objectives
is in no way preset

Note: The decomposition has been adjusted for the liquidity premium
in TIPS yields.
Source: Bloomberg, Blue Chip, and staff calculations.

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APRIL 2016 FOMC STATEMENT
1. Information received since the Federal Open Market Committee met in March
indicates that labor market conditions have improved further even as growth in
economic activity appears to have slowed. Growth in household spending has
moderated, although households’ real income has risen at a solid rate and consumer
sentiment remains high. Since the beginning of the year, the housing sector has
improved further but business fixed investment and net exports have been soft. A
range of recent indicators, including strong job gains, points to additional
strengthening of the labor market. Inflation has continued to run below the
Committee’s 2 percent longer-run objective, partly reflecting earlier declines in
energy prices and falling prices of non-energy imports. Market-based measures of
inflation compensation remain low; survey-based measures of longer-term inflation
expectations are little changed, on balance, in recent months.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The Committee currently expects that, with gradual
adjustments in the stance of monetary policy, economic activity will expand at a
moderate pace and labor market indicators will continue to strengthen. Inflation is
expected to remain low in the near term, in part because of earlier declines in energy
prices, but to rise to 2 percent over the medium term as the transitory effects of
declines in energy and import prices dissipate and the labor market strengthens
further. The Committee continues to closely monitor inflation indicators and global
economic and financial developments.
3. Against this backdrop, the Committee decided to maintain the target range for the
federal funds rate at ¼ to ½ percent. The stance of monetary policy remains
accommodative, thereby supporting further improvement in labor market conditions
and a return to 2 percent inflation.
4. In determining the timing and size of future adjustments to the target range for the
federal funds rate, the Committee will assess realized and expected economic
conditions relative to its objectives of maximum employment and 2 percent inflation.
This assessment will take into account a wide range of information, including
measures of labor market conditions, indicators of inflation pressures and inflation
expectations, and readings on financial and international developments. In light of
the current shortfall of inflation from 2 percent, the Committee will carefully monitor
actual and expected progress toward its inflation goal. The Committee expects that
economic conditions will evolve in a manner that will warrant only gradual increases
in the federal funds rate; the federal funds rate is likely to remain, for some time,
below levels that are expected to prevail in the longer run. However, the actual path
of the federal funds rate will depend on the economic outlook as informed by
incoming data.

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5. The Committee is maintaining its existing policy of reinvesting principal payments
from its holdings of agency debt and agency mortgage-backed securities in agency
mortgage-backed securities and of rolling over maturing Treasury securities at
auction, and it anticipates doing so until normalization of the level of the federal
funds rate is well under way. This policy, by keeping the Committee’s holdings of
longer-term securities at sizable levels, should help maintain accommodative
financial conditions.

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JUNE 2016 ALTERNATIVE A
1. Information received since the Federal Open Market Committee met in March April
indicates that, labor market conditions have improved further even as although
growth in economic activity appears to have slowed picked up, the pace of
improvement in the labor market has slowed. Growth in household spending has
moderated, strengthened. although households’ real income has risen at a solid rate
and consumer sentiment remains high. Since the beginning of the year, the housing
sector has improved further continued to improve and the drag from net exports
appears to have diminished, but business fixed investment and net exports have has
been soft. A range of recent indicators, including strong job gains, points to
additional strengthening of the labor market. Although the unemployment rate has
declined, job gains have slowed noticeably. Inflation has continued to run below
the Committee’s 2 percent longer-run objective, only partly reflecting because of
earlier declines in energy prices and falling in prices of non-energy imports.
Moreover, market-based measures of inflation compensation remain low; and some
survey-based measures of longer-term inflation expectations are little changed, on
balance, in recent months have declined.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The Committee currently expects that, with gradual
adjustments in the stance of appropriate monetary policy accommodation,
economic activity will expand at a moderate pace and labor market indicators will
continue to strengthen. Inflation is expected to remain low in the near term, in part
because of earlier declines in energy prices, but to rise to 2 percent over the medium
term as the transitory effects of past declines in energy and import prices dissipate
and the labor market strengthens further. The Committee continues to closely
monitor inflation indicators and global economic and financial developments sees the
risks to the economic outlook as tilted somewhat to the downside.
3. Against this backdrop, the Committee decided to maintain the target range for the
federal funds rate at ¼ to ½ percent. The stance of monetary policy remains
accommodative, thereby supporting further improvement in labor market conditions
and a return to 2 percent inflation. The Committee judges that an increase in the
target range will not be warranted until the risks to the outlook are more closely
balanced and inflation moves closer to 2 percent on a sustained basis.
4. In determining the When adjustments to the target range become appropriate,
their timing and size of future adjustments to the target range for the federal funds
rate, the Committee will assess will depend on the Committee’s assessment of
realized and expected economic conditions relative to its objectives of maximum
employment and 2 percent inflation. This assessment will take into account a wide
range of information, including measures of labor market conditions, indicators of
inflation pressures and inflation expectations, and readings on financial and
international developments. In light of the current shortfall of inflation from 2

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percent, the Committee will carefully monitor actual and expected progress toward its
inflation goal. The Committee expects that economic conditions will evolve in a
manner that will warrant only gradual increases in the federal funds rate; the federal
funds rate is likely to remain remaining, for some time, below levels that are
expected to prevail in the longer run. However, the actual path of the federal funds
rate will depend on the economic outlook as informed by incoming data.
5. The Committee is maintaining its existing policy of reinvesting principal payments
from its holdings of agency debt and agency mortgage-backed securities in agency
mortgage-backed securities and of rolling over maturing Treasury securities at
auction, and it anticipates doing so until normalization of the level of the federal
funds rate is well under way. This policy, by keeping the Committee’s holdings of
longer-term securities at sizable levels, should help maintain accommodative
financial conditions.

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JUNE 2016 ALTERNATIVE B
1. Information received since the Federal Open Market Committee met in March April
indicates that the pace of improvement in the labor market conditions have
improved further has slowed even as while growth in economic activity appears to
have slowed picked up. Although the unemployment rate has declined, job gains
have diminished. Growth in household spending has moderated, strengthened.
although households’ real income has risen at a solid rate and consumer sentiment
remains high. Since the beginning of the year, the housing sector has improved
further continued to improve and the drag from net exports appears to have
lessened, but business fixed investment and net exports have has been soft. A range
of recent indicators, including strong job gains, points to additional strengthening of
the labor market. Inflation has continued to run below the Committee’s 2 percent
longer-run objective, partly reflecting earlier declines in energy prices and falling in
prices of non-energy imports. Market-based measures of inflation compensation
remain low declined; most survey-based measures of longer-term inflation
expectations are little changed, on balance, in recent months.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The Committee currently expects that, with gradual
adjustments in the stance of monetary policy, economic activity will expand at a
moderate pace and labor market indicators will continue to strengthen. Inflation is
expected to remain low in the near term, in part because of earlier declines in energy
prices, but to rise to 2 percent over the medium term as the transitory effects of past
declines in energy and import prices dissipate and the labor market strengthens
further. The Committee continues to closely monitor inflation indicators and global
economic and financial developments.
3. Against this backdrop, the Committee decided to maintain the target range for the
federal funds rate at ¼ to ½ percent. The stance of monetary policy remains
accommodative, thereby supporting further improvement in labor market conditions
and a return to 2 percent inflation.
4. In determining the timing and size of future adjustments to the target range for the
federal funds rate, the Committee will assess realized and expected economic
conditions relative to its objectives of maximum employment and 2 percent inflation.
This assessment will take into account a wide range of information, including
measures of labor market conditions, indicators of inflation pressures and inflation
expectations, and readings on financial and international developments. In light of
the current shortfall of inflation from 2 percent, the Committee will carefully monitor
actual and expected progress toward its inflation goal. The Committee expects that
economic conditions will evolve in a manner that will warrant only gradual increases
in the federal funds rate; the federal funds rate is likely to remain, for some time,
below levels that are expected to prevail in the longer run. However, the actual path

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of the federal funds rate will depend on the economic outlook as informed by
incoming data.
5. The Committee is maintaining its existing policy of reinvesting principal payments
from its holdings of agency debt and agency mortgage-backed securities in agency
mortgage-backed securities and of rolling over maturing Treasury securities at
auction, and it anticipates doing so until normalization of the level of the federal
funds rate is well under way. This policy, by keeping the Committee’s holdings of
longer-term securities at sizable levels, should help maintain accommodative
financial conditions.

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JUNE 2016 ALTERNATIVE C
1. Information received since the Federal Open Market Committee met in March April
indicates that the pace of improvement in the labor market conditions have
improved further has slowed even as while growth in economic activity appears to
have slowed picked up. Growth in household spending has moderated,
strengthened. although households’ real income has risen at a solid rate and
consumer sentiment remains high. Since the beginning of the year, the housing sector
has improved further continued to improve and the drag from net exports appears
to have diminished, but business fixed investment and net exports have has been
soft. A range of recent indicators, including strong job gains, points to additional
strengthening of the labor market. Although job gains slowed, the unemployment
rate has declined noticeably. Inflation has risen somewhat, but it has continued to
run below the Committee’s 2 percent longer-run objective, partly reflecting largely
because of earlier declines in energy prices and falling in prices of non-energy
imports. Market-based measures of inflation compensation remain low; most surveybased measures of longer-term inflation expectations are little changed, on balance, in
recent months.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum
employment and price stability. The Committee currently expects that, with gradual
adjustments in the stance of monetary policy, economic activity and employment
will expand at a moderate pace rates. and labor market indicators will continue to
strengthen. Inflation is expected to remain low in the near term, in part because of
earlier declines in energy prices, but to rise to 2 percent over the medium term as the
transitory effects of past declines in energy and import prices dissipate and the labor
market strengthens further. The Committee continues to closely monitor inflation
indicators and global economic and financial developments.
3. Against this backdrop, The Committee decided today to maintain the target range for
the federal funds rate at ¼ to ½ percent but agreed that a modest increase in the
federal funds rate will likely be appropriate in coming months if incoming
information confirms the Committee’s expectations for economic activity, the
labor market, and inflation. The stance of monetary policy remains
accommodative, thereby supporting further improvement strengthening in labor
market conditions and a return to 2 percent inflation.
OR
3.ʹ In light of recent and expected progress toward its statutory goals, the Committee
decided to maintain increase the target range for the federal funds rate at ¼ to ½ to ¾
percent. The stance of monetary policy remains accommodative, even after this
increase, thereby supporting further improvement strengthening in labor market
conditions and a return to 2 percent inflation.

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4. In determining the timing and size of future adjustments to the target range for the
federal funds rate, the Committee will assess realized and expected economic
conditions relative to its objectives of maximum employment and 2 percent inflation.
This assessment will take into account a wide range of information, including
measures of labor market conditions, indicators of inflation pressures and inflation
expectations, and readings on financial and international developments. In light of
the current shortfall of inflation from 2 percent, the Committee will carefully monitor
actual and expected progress toward its inflation goal. The Committee expects that
economic conditions will evolve in a manner that will warrant only gradual increases
in the federal funds rate; the federal funds rate is likely to remain, for some time,
below levels that are expected to prevail in the longer run. However, the actual path
of the federal funds rate will depend on the economic outlook as informed by
incoming data.
5. The Committee is maintaining its existing policy of reinvesting principal payments
from its holdings of agency debt and agency mortgage-backed securities in agency
mortgage-backed securities and of rolling over maturing Treasury securities at
auction, and it anticipates doing so until normalization of the level of the federal
funds rate is well under way. This policy, by keeping the Committee’s holdings of
longer-term securities at sizable levels, should help maintain accommodative
financial conditions.

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Implementation Note if the Committee maintains the current target range
Release Date: April 27 June 15, 2016
Decisions Regarding Monetary Policy Implementation
The Federal Reserve has made the following decisions to implement the monetary policy stance
announced by the Federal Open Market Committee in its statement on April 27 June 15, 2016:
•

The Board of Governors of the Federal Reserve System left unchanged the interest rate
paid on required and excess reserve balances at 0.50 percent.

•

As part of its policy decision, the Federal Open Market Committee voted to authorize and
direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed
otherwise, to execute transactions in the System Open Market Account in accordance
with the following domestic policy directive:
“Effective April 28 June 16, 2016, the Federal Open Market Committee directs
the Desk to undertake open market operations as necessary to maintain the federal
funds rate in a target range of ¼ to ½ percent, including overnight reverse
repurchase operations (and reverse repurchase operations with maturities of more
than one day when necessary to accommodate weekend, holiday, or similar
trading conventions) at an offering rate of 0.25 percent, in amounts limited only
by the value of Treasury securities held outright in the System Open Market
Account that are available for such operations and by a per-counterparty limit of
$30 billion per day.
The Committee directs the Desk to continue rolling over maturing Treasury
securities at auction and to continue reinvesting principal payments on all agency
debt and agency mortgage-backed securities in agency mortgage-backed
securities. The Committee also directs the Desk to engage in dollar roll and
coupon swap transactions as necessary to facilitate settlement of the Federal
Reserve’s agency mortgage-backed securities transactions.”
More information regarding open market operations may be found on the Federal
Reserve Bank of New York’s website.

•

The Board of Governors of the Federal Reserve System took no action to change the
discount rate (the primary credit rate), which remains at 1.00 percent.

This information will be updated as appropriate to reflect decisions of the Federal Open Market
Committee or the Board of Governors regarding details of the Federal Reserve’s operational
tools and approach used to implement monetary policy.

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Implementation Note if the Committee raises the target range to ½ to ¾ percent
Release Date: April 27 June 15, 2016
Decisions Regarding Monetary Policy Implementation
The Federal Reserve has made the following decisions to implement the monetary policy stance
announced by the Federal Open Market Committee in its statement on April 27 June 15, 2016:
•

The Board of Governors of the Federal Reserve System left unchanged the interest rate
paid on required and excess reserve balances at 0.50 percent voted [ unanimously ] to
raise the interest rate paid on required and excess reserve balances to 0.75 percent,
effective June 16, 2016.

•

As part of its policy decision, the Federal Open Market Committee voted to authorize and
direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed
otherwise, to execute transactions in the System Open Market Account in accordance
with the following domestic policy directive:
“Effective April 28 June 16, 2016, the Federal Open Market Committee directs
the Desk to undertake open market operations as necessary to maintain the federal
funds rate in a target range of ¼ to ½ to ¾ percent, including overnight reverse
repurchase operations (and reverse repurchase operations with maturities of more
than one day when necessary to accommodate weekend, holiday, or similar
trading conventions) at an offering rate of 0.25 0.50 percent, in amounts limited
only by the value of Treasury securities held outright in the System Open Market
Account that are available for such operations and by a per-counterparty limit of
$30 billion per day.
The Committee directs the Desk to continue rolling over maturing Treasury
securities at auction and to continue reinvesting principal payments on all agency
debt and agency mortgage-backed securities in agency mortgage-backed
securities. The Committee also directs the Desk to engage in dollar roll and
coupon swap transactions as necessary to facilitate settlement of the Federal
Reserve’s agency mortgage-backed securities transactions.”
More information regarding open market operations may be found on the Federal
Reserve Bank of New York’s website.

•

In a related action, the Board of Governors of the Federal Reserve System took no
action to change the discount rate (the primary credit rate), which remains at 1.00 voted
[ unanimously ] to approve a ¼ percentage point increase in the discount rate (the
primary credit rate) to 1.25 percent, effective June 16, 2016. In taking this action,
the Board approved requests submitted by the Boards of Directors of the Federal
Reserve Banks of …

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Appendix 5: Materials used by Mr. Madigan

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CORRECTED

Exhibit 3. Overview of FOMC participants’ assessments of appropriate monetary policy
Percent

June projections
Target federal funds rate or midpoint of target range at year-end

5.0

June projections
Median prescription based on Taylor (1999) rule
Median of projections

4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

2016

2017

2018

Longer run

Percent

March projections
Target federal funds rate or midpoint of target range at year-end

5.0

March projections
Median prescription based on Taylor (1999) rule
Median of projections

4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0

2016

2017

2018

Longer run

Page 3 of 5

Full text of Federal Open Market Committee Meeting Minutes, Transcripts, and Other Documents : Meeting, June 14-15, 2016 : Presentation Materials

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