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March 17–18, 2015 Authorized for Public Release Appendix 1: Materials used by Mr. Potter and Ms. Logan 192 of 239 March 17–18, 2015 Authorized for Public Release Class II FOMC – Restricted (FR) Material for Briefing on Financial Developments and Open Market Operations Simon Potter and Lorie Logan March 17, 2015 193 of 239 March 17–18, 2015 Authorized for Public Release 194 of 239 Class II FOMC – Restricted (FR) Exhibit 1 (1) Nominal Five-Year, Five-Year Forward Rates U.S. U.K. Germany Japan Percent 5 (2) Intermeeting Changes in Yields BPS Empl. Report Other ECB Inflation Data FOMC-Related Intermeeting Total 80 FOMC 60 4 40 3 20 0 2 -20 1 -40 0 01/01/14 -60 04/01/14 07/01/14 10/01/14 2-Yr 01/01/15 (3) Distribution of Market Beliefs on the Timing of Liftoff* Apr '15 10-Yr 30-Yr (4) Expectations for Inflation at Liftoff* Modal Expectation Mar '15 Average Jan '15 Average 80 70 60 50 40 30 20 10 0 Mar '15 5-Yr, 5-Yr Source: Bloomberg Source: Bloomberg Percent 5-Yr Jun '15 Jul '15 Sep '15 Survey Oct '15 Dec '15 ≥ Jan '16 *Based on all responses from the Survey of Primary Dealers and Survey of Market Participants. Dots scaled by percent of respondents. Source: Federal Reserve Bank of New York Mar '14 Apr '14 Jun '14 Jul '14 Sep '14 Oct '14 Dec '14 Jan '15 Mar '15 Average 5y5y IC Since 2003 2.6 FOMC 23% 22% 18% 18% 17% 20% 22% 26% 35% 28% 26% 21% 22% 25% 24% 29% 40% 42% Euro-Dollar Exchange Rate (LHS) 2-Year Rate Spread (RHS) $/Bbl Dollars per Euro 120 1.40 100 1.30 2.4 2.2 80 1.20 2.0 10/01/14 Source: Federal Reserve Board of Governors, Bloomberg 01/01/15 Euro depreciation against the Dollar; German rates decline relative to U.S. 60 1.10 40 1.00 01/01/14 04/01/14 07/01/14 10/01/14 01/01/15 1.8 1.6 01/01/14 04/01/14 07/01/14 2.0% 2.0% 2.0% 2.2% 2.1% 2.0% 2.0% 2.0% 2.0% Buy Side (6) Euro-Dollar Performance and Two-Year German-U.S. Rate Spread 5-Year, 5-Year Inflation Compensation (LHS) Front-Month Brent Crude Oil (RHS) 2.8 1.8% 1.8% 1.8% 2.0% 1.9% 1.8% 1.6% 0.8% 0.4% Dealers *Modal expectations are medians of all responses from the Survey of Primary Dealers and Survey of Market Participants; probabilities are averages of responses from each respective survey. Source: Federal Reserve Bank of New York (5) U.S. Inflation Compensation and Oil Prices Percent 12m Headline Inflation 1-2 PCE Inflation Years Ahead Probability of Inflation 1-2 Years Ahead <1.75% Source: Bloomberg BPS -10 -20 -30 -40 -50 -60 -70 -80 -90 -100 March 17–18, 2015 Authorized for Public Release 195 of 239 Class II FOMC – Restricted (FR) Exhibit 2 (7) Euro-Area Asset Price Developments* (8) Changes in German Sovereign Yields* Since Mar '15 ECB Since Jan '15 ECB +2.0 +11.8 -2.2 +1.0 +18 -32 Changes in Percent EuroStoxx 50 Index S&P 500 Index Changes in Basis Points European High Yield OAS Jan '15 ECB to Mar '15 ECB Since Mar '15 ECB BPS 0 -20 -40 Italian 30-Year Spread to Germany -14 -68 Spanish 30-Year Spread to Germany -13 -47 Euro-Area 5-Year 5-Year Inflation Swap +1 +7 *Through 03/13/15. Source: Bloomberg, Barclays -60 2-Yr (-0.23%) Sweden Denmark Germany Switzerland 1.5 7-Yr (-0.00%) 10-Yr (0.26%) 30-Yr (0.72%) *Levels as of 03/13/15 in parentheses. Source: Bloomberg (9) Nominal Two-Year Rates Percent 5-Yr (-0.09%) (10) Japanese Thirty-Year Bond Yield and Implied Volatility 30-Year Bond Yield (LHS) 3-Month Implied Volatility (RHS) Percent Jan '15 SNB 2.00 BPS/Year 100 QQE2 1.0 1.80 80 1.60 60 -0.5 1.40 40 -1.0 1.20 20 0.5 0.0 -1.5 01/01/14 04/01/14 07/01/14 10/01/14 01/01/15 Source: Bloomberg 6.40 6.35 6.30 6.25 6.20 6.15 6.10 6.05 6.00 5.95 01/01/14 Trading Band Official Dollar-Renminbi Central Parity Rate Onshore Dollar-Renminbi Depreciation against Dollar 04/01/14 Source: Bloomberg 0 10/01/14 01/01/15 Source: Bloomberg (11) Chinese Renminbi Performance Against the U.S. Dollar Renminbi per Dollar 1.00 01/01/14 04/01/14 07/01/14 07/01/14 10/01/14 01/01/15 (12) Standardized Implied Volatility Indices* Equities Currencies Long Rates Standard Deviations 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 -2.5 01/01/14 10/15/14 04/01/14 07/01/14 10/01/14 Jan '15 SNB 01/01/15 *Standardized 1-month implied volatilities since June 1994. Source: Bloomberg, CBOE, Deutsche Bank, Barclays, Federal Reserve Bank of New York Staff Calculations March 17–18, 2015 Authorized for Public Release 196 of 239 Class II FOMC – Restricted (FR) Exhibit 3 (14) TDF Deposits Outstanding (13) Realized and Projected MBS Reinvestments Realized Reinvestments Mar '15 Projected Reinvestments Dec '14 Projected Reinvestments $ Billions 40 Two Largest Participants* All Other Participants $ Billions 450 400 350 300 250 200 150 100 50 0 35 30 25 20 02/05/15 15 10 09/01/12 09/01/13 09/01/15 09/01/14 Source: Federal Reserve Bank of New York Memo: Peak of Prior Series (16) Term RRP Operation Results ON RRP Outstanding Term RRP Outstanding Bids Exceeding $300 Billion ON RRP Limit Offered ($ Billions) $ Billions 02/12 02/19 02/26 03/05 10 30 50 50 Bids ($ Billions) 450 400 350 300 250 200 150 100 50 0 04/07/14 06/11/14 08/14/14 10/20/14 12/24/14 Accepted 10 30 50 50 Submitted 69 74 88 74 Stop-out 6 6 6 6 High Bid 10 10 10 8 Low Bid 6 5 5 5 10 10 10 8 Rates (BPS) Maximum Bid Rate Source: Federal Reserve Bank of New York (17) Sources of Term RRP Awards $ Billions 02/19/15 *One of the two largest participants placed bids under two separate legal entities, allowing it to invest more than the $20 billion per counterparty limit per operation. Source: Federal Reserve Board of Governors (15) Overnight and Term RRP Outstanding Source: Federal Reserve Bank of New York 02/12/15 Rolled from Maturing Term RRP Substituted from ON RRP Other Sources (18) Overnight Interest Rates* BPS Tri-party ex. GCF Treasury Repo Rate Federal Funds Effective Rate ON RRP Rate 16 14 12 10 8 6 4 60 50 40 30 20 10 0 02/12/15 02/19/15 Source: Federal Reserve Bank of New York 02/26/15 03/05/15 2 0 04/07/14 06/11/14 08/15/14 10/19/14 12/23/14 02/26/15 *Dark trip wires indicate quarter-ends, light trip wires indicate month-ends. Source: Federal Reserve Bank of New York March 17–18, 2015 Authorized for Public Release 197 of 239 Class II FOMC – Restricted (FR) Exhibit 4 (Last) (19) Spread Between Overnight Treasury GCF and Tri-party ex. GCF Repo Rates* (20) Dealer Repo and Treasury Bills Outstanding* BPS $ Billions 12 2,200 10 2,000 8 Primary Dealer Overnight Repo Outstanding Treasury Bills Outstanding 1,800 6 1,600 4 1,400 2 0 01/08/13 07/08/13 01/08/14 07/08/14 01/08/15 *Weekly data. Source: Federal Reserve Bank of New York, Bloomberg 1,200 2009 2010 2011 2012 2013 2014 2015 *Monthly data through February 2015. Source: Federal Reserve Bank of New York, U.S. Treasury, Haver Analytics (21) Foreign RP Pool (22) Evolution of Expected ON RRP Usage* $ Billions $ Billions 140 600 Immediately Following Liftoff One Year Following Liftoff Three Years Following Liftoff 120 500 100 80 400 60 300 40 200 20 Jun '14 Jul '14 Sep '14 Oct '14 Dec '14 Jan '15 Mar '15 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Federal Reserve Board of Governors *Median of all responses from the Survey of Primary Dealers and Survey of Market Participants. Source: Federal Reserve Bank of New York (24) Proposed Term RRP Resolution (23) Distribution of Expected ON RRP Usage* January Average March Average $ Billions 1,000 • Could consider term RRP over future quarter-ends o Useful for operational readiness o May be helpful if liftoff occurs around quarter-end Rates may trade soft if market uncertain about ON RRP cap • Options for authorizing term RRP testing o Option 1: Authorize for remaining 2015 quarter-ends Not obligated to conduct the operations Simpler from an administrative and communications standpoint o Option 2: Authorize each quarter 800 600 400 200 0 Jan '15 Mar '15 Jan '15 Mar '15 Jan '15 Mar '15 Immediately Following Liftoff One Year Following Liftoff Three Years Following Liftoff *Based on all responses from the Survey of Primary Dealers and Survey of Market Participants. Boxes show 10th-90th percentile ranges and medians. Source: Federal Reserve Bank of New York March 17–18, 2015 Authorized for Public Release Appendix 2: Materials used by Ms. Logan 198 of 239 March 17–18, 2015 Authorized for Public Release Class II FOMC – Restricted (FR) Quarter-end Term RRP Operations Resolution March 17-18, 2015 199 of 239 March 17–18, 2015 Authorized for Public Release 200 of 239 Class II FOMC – Restricted (FR) Option 1: Proposed Resolution on Term RRP Testing over the End of the Second Quarter of 2015 “During the period of June 18, 2015, to June 29, 2015, the Federal Open Market Committee (FOMC) authorizes the Federal Reserve Bank of New York to conduct a series of term reverse repurchase operations involving U.S. government securities. Such operations shall: (i) mature no later than July 8, 2015; (ii) be subject to an overall size limit of $300 billion outstanding at any one time; (iii) be subject to a maximum bid rate of five basis points above the ON RRP offering rate in effect on the day of the operation; (iv) be awarded to all submitters: (A) at the highest submitted rate if the sum of the bids received is less than or equal to the preannounced size of the operation, or (B) at the stop-out rate, determined by evaluating bids in ascending order by submitted rate up to the point at which the total quantity of bids equals the preannounced size of the operation, with all bids below this rate awarded in full at the stop-out rate and all bids at the stop-out rate awarded on a pro rata basis, if the sum of the counterparty offers received is greater than the preannounced size of the operation. Such operations may be for forward settlement. The System Open Market Account manager will inform the FOMC in advance of the terms of the planned operations. The Chair must approve the terms of, timing of the announcement of, and timing of the operations. These operations shall be conducted in addition to the authorized overnight reverse repurchase agreements, which remain subject to a separate overall size limit authorized by the FOMC.” Option 2: Proposed Resolution on Term RRP Testing over Quarter-ends through January 29, 2016 “During each of the periods of June 18 to 29, 2015; September 18 to 29, 2015; and December 17 to 30, 2015, the Federal Open Market Committee (FOMC) authorizes the Federal Reserve Bank of New York to conduct a series of term reverse repurchase operations involving U.S. government securities. Such operations shall: (i) mature no later than July 8, 2015, October 7, 2015, and January 8, 2016, respectively; (ii) be subject to an overall size limit of $300 billion outstanding at any one time; (iii) be subject to a maximum bid rate of five basis points above the ON RRP offering rate in effect on the day of the operation; (iv) be awarded to all submitters: (A) at the highest submitted rate if the sum of the bids received is less than or equal to the preannounced size of the operation, or (B) at the stop-out rate, determined by evaluating bids in ascending order by submitted rate up to the point at which the total quantity of bids equals the preannounced size of the operation, with all bids below this rate awarded in full at the stop-out rate and all bids at the stop-out rate awarded on a pro rata basis, if the sum of the counterparty offers received is greater than the preannounced size of the operation. Such operations may be for forward settlement. The System Open Market Account manager will inform the FOMC in advance of the terms of the planned operations. The Chair must approve the terms of, timing of the announcement of, and timing of the operations. These operations shall be conducted in addition to the authorized overnight reverse repurchase agreements, which remain subject to a separate overall size limit authorized by the FOMC.” Page 1 of 1 March 17–18, 2015 Authorized for Public Release Appendix 3: Materials used by Ms. Ihrig and Mr. Martin 201 of 239 March 17–18, 2015 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Material for Discussion of Normalization Tools Jane E. Ihrig and Antoine Martin March 17, 2015 202 of 239 March 17–18, 2015 Authorized for Public Release 203 of 239 ON RRP capacity issues Options for initial aggregate ON RRP capacity o Option 1: Temporarily elevate initial cap o o o Communications about initial capacity Sensitive to financial stability and footprint concerns o March minutes report capacity at liftoff "temporarily elevated" o Ahead of liftoff or at liftoff announce initial capacity If insufficient interest rate control, increase the cap Option 2: Suspend cap for a short period; establish cap at end of brief period o Early: provide markets with further clarity of liftoff strategy − At liftoff: evaluate developments as they evolve Substantial capacity to start Reserve balances Monthly Going forward Billions of dollars January Tealbook Draining Tools 3 Years to Maturity Treasury Sales 3 Years to Maturity Treasury Sales + Draining Tools 3000 o In the longer run, use of the ON RRP facility could be expected to wane, which would make elimination of ON RRPs straightforward o If usage remains well below the cap, that cap could be reduced with little effect on market rates, so long as "headroom" remains sufficient o If usage is high, substantial use of other tools may be needed to provide rate support o The Committee will need to weigh tradeoffs between efficacy and costs for these tools o Clear public communication about the ON RRP cap could avoid sending an unintended signal 2500 2000 1500 1000 500 0 2008 − 2011 2014 2017 2020 2023 Source: H.4.1 release and staff estimates. 1 of 3 March 17–18, 2015 Authorized for Public Release 204 of 239 Questions for the Normalization Tools Discussion 1. What are your general views of the two options for the initial setting of the aggregate cap on ON RRP capacity discussed in the March 6, 2015, memo entitled, “More Steps towards Finalizing the FOMC's Operational Preparations for Liftoff”? Those options are: a. establishing a temporary elevated cap at liftoff and adjusting it later as appropriate or, alternatively, b. operating for a brief initial period without a cap and then imposing a cap based on observed take-up on ON RRP operations after liftoff 2. What are your general views regarding strategies that the Committee could use to reduce ON RRP take-up after liftoff while maintaining appropriate interest rate control? (These strategies are discussed in the March 6, 2015, memo entitled, “Lowering the ON RRP Facility Cap after Liftoff.”) 2 of 3 March 17–18, 2015 Authorized for Public Release 205 of 239 Proposed March Minutes Language [Participants] agreed to augment the Committee’s Policy Normalization Principles and Plans by providing the following additional details regarding the operational approach the FOMC will use when it becomes appropriate to begin normalizing the stance of monetary policy.1 When economic conditions warrant the commencement of policy firming, the Federal Reserve will: Continue to target a range for the federal funds rate that is 25 basis points wide. Set the rate of interest on excess reserves (IOER) equal to the top of the target range for the federal funds rate and set the offering rate associated with an overnight reverse repurchase agreement (ON RRP) facility equal to the bottom of the target range for the federal funds rate. Allow aggregate capacity of the ON RRP facility to be temporarily elevated to support policy implementation. Adjust the IOER rate and the parameters of the ON RRP facility, and use other tools such as term operations, as necessary for appropriate monetary control, based on policymakers’ assessments of the efficacy and costs of their tools. The Committee expects to reduce the available capacity of the facility fairly soon after it commences policy firming. 1 The Committee’s Policy Normalization Principles and Plans, released September 17, 2014, may be found at the following link: http://www.federalreserve.gov/newsevents/press/monetary/20140917c.htm. 3 of 3 March 17–18, 2015 Authorized for Public Release Appendix 4: Materials used by Mr. Kamin 206 of 239 March 17–18, 2015 Authorized for Public Release Class II FOMC – Restricted (FR) Material for The International Outlook Steven B. Kamin March 17, 2015 207 of 239 March 17–18, 2015 Authorized for Public Release 208 of 239 Exhibit 1 Class II FOMC - Restricted (FR) The International Outlook 1. Foreign GDP 2. Euro-Area GDP Percent change, annual rate Percent change, annual rate 6 January TB History and current forecast January TB 5 Emerging market economies 5 4 4 3 3 2 2 1 1 0 0 -1 Total Advanced foreign economies -1 2012 2013 2014 2015 2016 -2 2017 2010 2011 2012 2013 2014 2015 2016 2017 Shaded region represents the forecast period on all panels. 3. Brent Spot Prices 5. Foreign Monetary Policy Action Index* 4. Foreign Inflation Rates Dollars per barrel History and current forecast January TB Percent change, four-quarter 150 130 January 2008 = 0 5 100 4 50 U.K. 3 110 Euro area 90 0 2 -50 1 70 -100 0 50 Japan* -150 -1 30 -200 -2 2007 2009 2011 2013 2015 2017 2010 2012 2014 *Excluding consumption tax. 2008 2016 2010 2012 2014 *Cumulative sum of monetary policy actions (-1 for policy loosening, 0 for no change, and +1 for policy tightening). Sample includes 37 countries. 7. 10-Year Government Bond Yields 6. Real Dollar Indexes 2007:Q1 = 100 Percent 125 January TB U.S. U.K. 120 Germany Japan 115 Dollar appreciation 110 6 5 4 105 3 100 AFE 95 Broad 2 90 EME 85 1 80 75 2007 2009 2011 2013 2015 2017 Page 1 of 1 0 2007 2009 2011 2013 March 17–18, 2015 Authorized for Public Release Appendix 5: Materials used by Mr. Wilcox 209 of 239 March 17–18, 2015 Authorized for Public Release Class II FOMC – Restricted (FR) Material for The U.S. Outlook David Wilcox March 17, 2015 210 of 239 March 17–18, 2015 Authorized for Public Release 211 of 239 Class II FOMC - Restricte Forecast Summary Confidence Intervals Based on FRB/US Stochastic Simulations 1. Unemployment Rate 2. Real GDP Percent 11 March TB Jan. TB Dec. TB 70% conf. interval 10 9 10 10 8 9 8 8 7 7 6 6 5 5 3 2013 2014 2015 2016 2017 March TB Jan. TB Dec. TB 70% confidence interval 6 8 6 4 2 2 0 0 4 -2 -2 3 -4 2013 2014 2015 2016 2017 *Effect of emergency unemployment compensation and state-federal extended benefit programs. Note: The solid dot gives the staff forecast for 2015:Q1 as of Monday, March 16. 3. Output Gap Estimates 4. PCE Prices Percentage points 6 FRB/US EDO Tealbook 4 2 10 4 Natural Rate with EEB* 4 Percent change, annual rate 11 6 7 4 6 2 Percent change, annual rate March TB Jan. TB Dec. TB 70% confidence interval 5 4 -4 7 6 5 4 0 0 3 3 -2 -2 2 2 -4 -4 1 1 -6 -6 -8 -10 2007 2008 2009 2010 2011 2012 2013 2014 0 0 -1 -1 -8 -2 -2 -10 -3 2013 2014 2015 2016 2017 -3 Note: The shaded region is the 2-standard deviation band around the FRB/US output gap, reflecting only filtering uncertainty. 5. PCE Prices Excluding Food and Energy Percent change, annual rate 5 March TB Jan. TB Dec. TB 70% confidence interval 4 3 6. Average Expected Inflation, Next 10 Years 5 1 1 0 0 2014 2015 3.5 3.0 3.0 2.5 2.5 2.0 2.0 3 2 2013 PCE CPI 4 2 -1 Percent 3.5 2016 2017 -1 1.5 1995 2000 2005 2010 2015 1.5 Note: Median response from the Survey of Professional Forecasters. Page 1 of 1 March 17–18, 2015 Authorized for Public Release Appendix 6: Materials used by Mr. Kim 212 of 239 March 17–18, 2015 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Material for Briefing on the Summary of Economic Projections Don Kim March 17, 2015 213 of 239 March 17–18, 2015 Authorized for Public Release 214 of 239 Exhibit 1. Central tendencies and ranges of economic projections, 2015–17 and over the longer run Percent Change in real GDP 4 Central tendency of projections Range of projections 3 2 1 + 0 - Actual 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Percent Unemployment rate 10 9 8 7 6 5 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Percent PCE inflation 3 2 1 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Percent Core PCE inflation 3 2 1 2010 2011 2012 2013 2014 2015 Note: The data for the actual values of the variables are annual. Page 1 of 5 2016 2017 Longer run March 17–18, 2015 Authorized for Public Release 215 of 239 Exhibit 2. Economic projections for 2015–17 and over the longer run (percent) Change in real GDP Central Tendency . . . . . . . . . . . . . December projection . . . . . . Range . . . . . . . . . . . . . . . . . . . . . . . . December projection . . . . . . Memo: Tealbook** . . . . . . . . . . . December projection . . . . . . 2015 I 2016 2.3 to 2.7 2.3 to 2.7 2.6 to 3.0 2.5 to 3.0 2.1 to 3.1 2.2 to 3.0 2.1 to 3.2 2.1 to 3.0 2.1 2.3 2.5 2.7 I 2017 2.0 to 2.4 2.3 to 2.5 1.8 to 2.5 2.0 to 2.7 2.0 2.2 I Longer run 2017 4.8 to 5.1 4.9 to 5.3 4.8 to 5.5 4.7 to 5.7 5.0 4.9 I Longer run 2017 1.9 to 2.0 1.8 to 2.0 1.7 to 2.2 1.8 to 2.2 1.9 1.8 I Longer run 2.0 2.0 1.8 1.8 to 2.3 to 2.3 to 2.5 to 2.7 1.9 2.0 Unemployment rate Central Tendency . . . . . . . . . . . . . December projection . . . . . . Range . . . . . . . . . . . . . . . . . . . . . . . . December projection . . . . . . Memo: Tealbook . . . . . . . . . . . . . December projection . . . . . . 2015 I 2016 5.0 to 5.2 4.9 to 5.1 5.2 to 5.3 5.0 to 5.2 4.8 to 5.4 4.5 to 5.2 5.0 to 5.5 4.9 to 5.4 5.2 5.1 5.2 5.0 I 5.0 5.2 4.9 5.0 to 5.2 to 5.5 to 5.8 to 5.8 5.2 5.2 PCE infation Central Tendency . . . . . . . . . . . . . December projection . . . . . . Range . . . . . . . . . . . . . . . . . . . . . . . . December projection . . . . . . Memo: Tealbook . . . . . . . . . . . . . December projection . . . . . . 2015 I 2016 0.6 to 0.8 1.7 to 1.9 1.0 to 1.6 1.7 to 2.0 0.6 to 1.5 1.6 to 2.4 1.0 to 2.2 1.6 to 2.1 0.6 1.7 1.0 1.7 I Core PCE infation Central Tendency . . . . . . . . . . . . . December projection . . . . . . Range . . . . . . . . . . . . . . . . . . . . . . . . December projection . . . . . . Memo: Tealbook . . . . . . . . . . . . . December projection . . . . . . 2015 I 2016 1.3 to 1.4 1.5 to 1.9 1.5 to 1.8 1.7 to 2.0 1.2 to 1.6 1.5 to 2.4 1.5 to 2.2 1.6 to 2.1 1.3 1.6 1.5 1.6 I 2017 1.8 to 2.0 1.8 to 2.0 1.7 to 2.2 1.8 to 2.2 1.8 1.8 * The percent changes in real GDP and infation are measured Q4/Q4. ** The March 2015 Tealbook value that was updated on March 13, 2015, is reported here. Page 2 of 5 2.0 2.0 2.0 2.0 2.0 2.0 March 17–18, 2015 Authorized for Public Release 216 of 239 Exhibit 3. FOMC participants’ assessments of the timing of and economic conditions at liftoff Appropriate timing of liftoff March projections December projections 10 9 8 8 7 6 6 5 4 3 2 1 1 1 1 2015Q1 2015Q2 2015Q3 2016Q1 Core PCE inflation March Economic Projections 4.5 2015Q4 5.0 5.5 Unemployment rate 2016Q2 2016Q3 December Economic Projections 2016Q4 Core PCE inflation 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 6.0 4.5 5.0 5.5 Unemployment rate 6.0 Year and Quarter of Firming 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q4 Note: In the upper panel, the height of each bar denotes the number of FOMC participants who judge that, under appropriate monetary policy, the first increase in the target range for the federal funds rate from its current range of 0 to 1/4 percent will occur in the specified calendar year and quarter. In the lower panels, when the projections of two or more participants are identical, larger markers, which represent one participant each, are used so that each projection can be seen. Page 3 of 5 March 17–18, 2015 Authorized for Public Release 217 of 239 Exhibit 4. Overview of FOMC participants’ assessments of appropriate monetary policy Percent Appropriate pace of policy firming Target federal funds rate or midpoint of target range at year-end 5 March projections 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2015 2016 2017 Longer run Percent Appropriate pace of policy firming Target federal funds rate or midpoint of target range at year-end 5 December projections 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2015 2016 2017 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 represent the median FOMC participant’s federal funds rate projections assuming that each FOMC participant applied the non-inertial Taylor 1999 Rule to his or her underlying projections for the unemployment gap, core PCE inflation and longer-run nominal federal funds rate. The whiskers represent the central tendency of the prescriptions of the non-inertial Taylor (1999) rule using participants’ projections. Page 4 of 5 March 17–18, 2015 Authorized for Public Release 218 of 239 Exhibit 5. Uncertainty and risks in economic projections Number of participants Uncertainty about GDP growth Risks to GDP growth March projections December projections Lower Broadly similar Number of participants March projections December projections 18 16 14 12 10 8 6 4 2 Higher Weighted to downside Broadly balanced Number of participants Uncertainty about the unemployment rate 18 16 14 12 10 8 6 4 2 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 5 of 5 Broadly balanced Weighted to upside March 17–18, 2015 Authorized for Public Release Appendix 7: Materials used by Mr. Laubach 219 of 239 March 17–18, 2015 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Revised Proposed March Minutes Language March 18, 2015 220 of 239 March 17–18, 2015 Authorized for Public Release 221 of 239 Revised Proposed March Minutes Language [Participants] agreed to augment the Committee’s Policy Normalization Principles and Plans by providing the following additional details regarding the operational approach the FOMC will intends to use when it becomes appropriate to begin normalizing the stance of monetary policy.1 When economic conditions warrant the commencement of policy firming, the Federal Reserve will intends to: Continue to target a range for the federal funds rate that is 25 basis points wide. Set the rate of interest on excess reserves (IOER) equal to the top of the target range for the federal funds rate and set the offering rate associated with an overnight reverse repurchase agreement (ON RRP) facility equal to the bottom of the target range for the federal funds rate. Allow aggregate capacity of the ON RRP facility to be temporarily elevated to support policy implementation; adjust the IOER rate and the parameters of the ON RRP facility, and use other tools such as term operations, as necessary for appropriate monetary control, based on policymakers’ assessments of the efficacy and costs of their tools. The Committee expects that it will be appropriate to reduce the available capacity of the facility fairly soon after it commences policy firming. The Committee’s Policy Normalization Principles and Plans, released September 17, 2014, may be found at the following link: www.federalreserve.gov/newsevents/press/monetary/20140917c.htm 1 1 of 1 March 17–18, 2015 Authorized for Public Release Appendix 8: Materials used by Mr. Laubach 222 of 239 March 17–18, 2015 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Updated SEP Information March 18, 2015 223 of 239 March 17–18, 2015 Authorized for Public Release 224 of 239 Embargoed for release at 2:00 p.m., EDT, March 18, 2015 Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, March 2015 Advance release of table 1 of the Summary of Economic Projections to be released with the FOMC minutes Percent 2015 Change in real GDP . . . . . . . . . . 2.3 to 2.7 December projection . . . . . . 2.6 to 3.0 Central tendency1 2016 2017 2.3 to 2.7 2.0 to 2.4 2.5 to 3.0 2.3 to 2.5 Unemployment rate . . . . . . . . . . . 5.0 to 5.2 December projection . . . . . . 5.2 to 5.3 4.9 to 5.1 5.0 to 5.2 PCE infation . . . . . . . . . . . . . . . . . 0.6 to 0.8 December projection . . . . . . 1.0 to 1.6 Core PCE infation3 . . . . . . . . . . 1.3 to 1.4 December projection . . . . . . 1.5 to 1.8 Variable Longer run 2.0 to 2.3 2.0 to 2.3 2015 2.1 to 3.1 2.1 to 3.2 Range2 2016 2017 2.2 to 3.0 1.8 to 2.5 2.1 to 3.0 2.0 to 2.7 4.8 to 5.1 4.9 to 5.3 5.0 to 5.2 5.2 to 5.5 4.8 to 5.3 5.0 to 5.5 4.5 to 5.2 4.9 to 5.4 4.8 to 5.5 4.7 to 5.7 4.9 to 5.8 5.0 to 5.8 1.7 to 1.9 1.7 to 2.0 1.9 to 2.0 1.8 to 2.0 2.0 2.0 0.6 to 1.5 1.0 to 2.2 1.6 to 2.4 1.6 to 2.1 1.7 to 2.2 1.8 to 2.2 2.0 2.0 1.5 to 1.9 1.7 to 2.0 1.8 to 2.0 1.8 to 2.0 1.2 to 1.6 1.5 to 2.2 1.5 to 2.4 1.6 to 2.1 1.7 to 2.2 1.8 to 2.2 Longer run 1.8 to 2.5 1.8 to 2.7 Note: Projections of change in real gross domestic product (GDP) and projections for both measures of infation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE infation and core PCE infation are the percentage rates of change in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The December projections were made in conjunction with the meeting of the Federal Open Market Committee on December 16–17, 2014. 1. The central tendency excludes the three highest and three lowest projections for each variable in each year. 2. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year. 3. Longer-run projections for core PCE infation are not collected. March 17–18, 2015 Authorized for Public Release 225 of 239 Figure 1. Central tendencies and ranges of economic projections, 2015–17 and over the longer run Percent Change in real GDP Central tendency of projections Range of projections 4 3 2 1 Actual + 0 - 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Percent Unemployment rate 10 9 8 7 6 5 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Percent PCE inflation 3 2 1 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Note: Definitions of variables are in the general note to the projections table. The data for the actual values of the variables are annual. March 17–18, 2015 Authorized for Public Release 226 of 239 Figure 2. Overview of FOMC participants’ assessments of appropriate monetary policy Number of participants Appropriate timing of policy firming 15 15 14 13 12 11 10 9 8 7 6 5 4 3 2 2 1 2015 2016 Percent Appropriate pace of policy firming: Midpoint of target range or target level for the federal funds rate 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2015 2016 2017 Longer run Note: In the upper panel, the height of each bar denotes the number of FOMC participants who judge that, under appropriate monetary policy, the first increase in the target range for the federal funds rate from its current range of 0 to 1/4 percent will occur in the specified calendar year. In December 2014, the numbers of FOMC participants who judged that the first increase in the target federal funds rate would occur in 2015, and 2016 were, respectively, 15, and 2. In the lower panel, each shaded 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. March 17–18, 2015 Authorized for Public Release Appendix 9: Materials used by Mr. Laubach 227 of 239 March 17–18, 2015 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Material for Briefing on Monetary Policy Alternatives Thomas Laubach March 17–18, 2015 228 of 239 March 17–18, 2015 Authorized for Public Release Exhibit 1 229 of 239 Market Expectations and Policy Issues Difference Between Participants’ FFR Projections Percentage Points and Taylor (1999)-Implied Values Policy Implications of Participants’ Projected FFR Shortfalls 0.5 • 0.0 Taylor (1999) rule: -0.5 ∗ 0.5 ∗ 2 2∗ -1.0 -1.5 • Median difference approximately -1.5pp in 2015 and 2016; narrows to approximately -0.5pp by 2017. • Are shortfalls from the Taylor (1999) benchmark a good measure of monetary policy accomodation? -2.0 -2.5 -3.0 -3.5 -4.0 -4.5 2015 2016 2017 Note: Taylor (1999)-implied FFR values are calculated using participants’ projections for unemployment and core PCE inflation. Source: March 2015 SEP. Estimates of Time-varying r* Implied by Participants’ Projections • IS equation relates the unemployment gap to the real interest rate gap as follows: ∗ ∗ ∗ ∗ ∗ • Estimate coefficients α and β using data from the 4th quarter of each year, staff’s estimates of u*, and Laubach-Williams estimates of r*. • Insert participants’ estimates of the longer-run unemployment rate and projections for the unemployment rate and real federal funds rate to solve for their implied time-varying r*. Difference Between Participants’ FFR Projections and Taylor (1999)-Implied Values Using TimePercentage Points Varying r* Projected r*: Implicit Year-End and Longer-Run Equilibrium Real Interest Rate Percent 2.5 1.5 2.0 1.0 1.5 0.5 0.0 1.0 -0.5 0.5 -1.0 0.0 -1.5 -0.5 -2.0 -1.0 -2.5 -1.5 -3.0 -2.0 -3.5 -2.5 -4.0 -3.0 2015 2016 2017 -4.5 Longer-run 2015 Note: 2017 values assume that participants’ projections for the unemployment rate in 2018 are equal to their longer-run values, and that core PCE inflation is equal to 2 percent by year-end 2018. Source: March 2015 SEP. 2016 2017 Note: Taylor (1999)-implied FFR values are calculated using participants’ projections for unemployment and core PCE inflation. Participants’ time-varying r* is assumed to be equal to their year-end equilibrium real interest rate (r*) t calculated above. Source: March 2015 SEP. Page 1 of 11 March 17–18, 2015 Exhibit 2 Authorized for Public Release 230 of 239 Market Expectations and Policy Issues (cont.) Caveats to this Analysis • Results are conditional on a specific IS equation. • Model does not provide insight into structural factors driving changes in r*. • Lingering effects of financial crisis, and restraint from economic and financial developments abroad may play some role. Policy Alternatives PCE Inflation: The Current Situation and the Outlook • Common Elements: Declined further below the Committee’s objective. Remains near its recent low level in the near-term. • Range of views on: Recent movements in inflation compensation. Degree of confidence in inflation outlook. Forward Guidance on First Increase in the Target Range for the Federal Funds Rate • Communicating the data dependence of the Committee’s liftoff decision: Further improvement in labor market conditions anticipated. Different characterization of inflation prospects that would warrant liftoff. • Shaping expecations for the timing of liftoff: Alternative B encompasses June or later. Alternative C boosts the odds of a June liftoff. Alternative A would push likely timing of liftoff further into the future. Page 2 of 11 March 17–18, 2015 Authorized for Public Release 231 of 239 JANUARY 2015 FOMC STATEMENT 1. Information received since the Federal Open Market Committee met in December suggests that economic activity has been expanding at a solid pace. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; recent declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months; survey-based measures of longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to decline further in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate. The Committee continues to monitor inflation developments closely. 3. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to ¼ percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress—both realized and expected—toward 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. Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated. 4. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgagebacked securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. 5. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. Page 3 of 11 March 17–18, 2015 Authorized for Public Release 232 of 239 FOMC STATEMENT—MARCH 2015 ALTERNATIVE A 1. Information received since the Federal Open Market Committee met in December January suggests indicates that growth in economic activity has been expanding at a solid pace moderated. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish, but wage increases remain subdued. Household spending is rising moderately; recent earlier declines in energy prices have boosted household purchasing power. Business fixed investment is advancing modestly, export growth has weakened, while and the recovery in the housing sector remains slow. Inflation has declined further below the Committee’s longer-run objective, largely partly reflecting earlier declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months remain well below levels observed last summer; survey-based measures of longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to decline further remain near its recent low level in the near term. , but The Committee expects inflation to rise very gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower earlier energy prices price declines and other factors dissipate. However, the Committee is concerned that inflation could run substantially below the 2 percent objective for a protracted period and continues to monitor inflation developments closely. 3. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to ¼ percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress—both realized and expected— toward 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. Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy until inflation is clearly moving up toward 2 percent. However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated. The Committee is prepared to use its tools as necessary to return inflation to 2 percent in two to three years. Page 4 of 11 March 17–18, 2015 Authorized for Public Release 233 of 239 4. 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. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. 5. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. Page 5 of 11 March 17–18, 2015 Authorized for Public Release 234 of 239 FOMC STATEMENT—MARCH 2015 ALTERNATIVE B 1. Information received since the Federal Open Market Committee met in December January suggests that economic activity has been is expanding at a solid moderate pace growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. On balance, A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; recent earlier declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened. Inflation has declined further below the Committee’s longerrun objective, largely reflecting earlier declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months have reversed part of their previous decline but remain low; survey-based measures of longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to decline further remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower earlier energy prices price declines and other factors dissipate. The Committee continues to monitor inflation developments closely. 3. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to ¼ percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress—both realized and expected— toward 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. Based on its current assessment Consistent with its previous statement, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range. However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves Page 6 of 11 March 17–18, 2015 Authorized for Public Release 235 of 239 slower than expected, then increases in the target range are likely to occur later than currently anticipated. 4. 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. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. 5. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. Page 7 of 11 March 17–18, 2015 Authorized for Public Release 236 of 239 FOMC STATEMENT—MARCH 2015 ALTERNATIVE C 1. Information received since the Federal Open Market Committee met in December January suggests indicates that economic activity has been expanding at a solid pace on average in recent quarters. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. On balance, A wide range of labor market indicators suggests that underutilization of labor resources continues to diminish the labor market is approaching conditions consistent with maximum employment. Household spending is rising moderately solidly; recent earlier declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow. Inflation has declined further below the Committee’s longer-run objective, largely reflecting earlier declines in energy prices. Market-based measures of inflation compensation have declined substantially in recent months increased; survey-based measures of longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to decline further remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward to 2 percent over the medium term as the labor market improves further and the transitory effects of lower earlier energy prices price declines and other factors dissipate. The Committee continues to monitor inflation developments closely. 3. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to ¼ percent target range for the federal funds rate remains appropriate. In determining how long to maintain this future adjustments of the target range for the federal funds rate, the Committee will assess progress—both realized and expected—toward 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. Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy economic conditions will likely warrant an increase in the target range for the federal funds rate in a couple of meetings. However, if incoming information indicates faster slower progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are the initial increase is likely to occur later than currently anticipated. 4. 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 Page 8 of 11 March 17–18, 2015 Authorized for Public Release 237 of 239 auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions. 5. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. Based on its economic outlook, the Committee currently anticipates that even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. In response to unanticipated economic and financial developments, the Committee will adjust the target federal funds rate to best promote the attainment of its objectives of maximum employment and 2 percent inflation. Page 9 of 11 March 17–18, 2015 Authorized for Public Release 238 of 239 JANUARY 2015 DIRECTIVE Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. In particular, 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 undertake open market operations as necessary to maintain such conditions. The Committee directs the Desk to maintain its policy of rolling over maturing Treasury securities into new issues and its policy of 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. The System Open Market Account manager and the secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability. Page 10 of 11 March 17–18, 2015 Authorized for Public Release 239 of 239 DIRECTIVE FOR MARCH 2015 ALTERNATIVES A, B, AND C Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. In particular, 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 undertake open market operations as necessary to maintain such conditions. The Committee directs the Desk to maintain its policy of rolling over maturing Treasury securities into new issues and its policy of 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. The System Open Market Account manager and the secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability. Page 11 of 11
@FedFRASER