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Accessible Version
Meeting of the Federal Open Market Committee
November 12, 2011 Presentation Materials
Presentation Materials (PDF)
Pages 239 to 282 of the Transcript
Appendix 1: Materials used by Mr. Kiley
Material for
Alternative Monetary Policy Frameworks
Briefing by Michael T. Kiley
November 1, 2011
Exhibit 1
Alternative Monetary Policy Frameworks
Top panel
FlexibleInflation Targeting and Commitment
Flexible inflation targeting combines commitment to a mediumrun inflation objective with the flexibility to
moderate deviations of employment from its "full employment" level.
We assumed that the Committee aims to achieve:
An inflation rate of 2 percent.
An unemployment rate in the range of 5 to 6 percent.
We focused on how strategies that involve making conditional commitments can contribute to improved
macroeconomic outcomes.
Middleleft panel
Federal Funds Rate
percent
Optimal control,
commitment
Optimal control,
discretion
2011:Q1
0.16
0.16
0.16
2011:Q2
0.09
0.09
0.09
2011:Q3
0.08
0.08
0.08
2011:Q4
0.10
0.09
0.12
2012:Q1
0.10
0.09
0.12
2012:Q2
0.09
0.10
0.12
2012:Q3
0.08
0.11
0.12
2012:Q4
0.07
0.10
0.12
2013:Q1
0.07
0.11
0.12
2013:Q2
0.07
0.11
0.12
2013:Q3
0.07
0.12
0.12
Period
September TB
baseline
Optimal control,
commitment
Optimal control,
discretion
2013:Q4
0.07
0.13
0.12
2014:Q1
0.08
0.14
0.13
2014:Q2
0.08
0.18
0.17
2014:Q3
0.09
0.24
0.32
2014:Q4
0.10
0.40
0.56
2015:Q1
0.11
0.63
0.91
2015:Q2
0.12
0.92
1.35
2015:Q3
0.14
1.23
1.75
2015:Q4
0.25
1.57
2.11
2016:Q1
0.52
1.90
2.42
2016:Q2
0.91
2.22
2.68
2016:Q3
1.36
2.53
2.91
2016:Q4
1.85
2.82
3.11
2017:Q1
2.35
3.09
3.28
2017:Q2
2.84
3.33
3.43
2017:Q3
3.30
3.54
3.57
2017:Q4
3.72
3.72
3.68
2018:Q1
4.10
3.88
3.78
2018:Q2
4.43
4.01
3.86
2018:Q3
4.71
4.12
3.93
2018:Q4
4.95
4.22
3.99
Period
September TB
baseline
Middleright panel
Unemployment Rate
percent
Optimal control,
commitment
Optimal control,
discretion
2011:Q1
8.93
8.93
8.93
2011:Q2
9.07
9.07
9.07
2011:Q3
9.09
9.09
9.09
2011:Q4
9.11
9.11
9.11
2012:Q1
9.07
9.08
9.10
2012:Q2
8.90
8.95
8.98
2012:Q3
8.70
8.79
8.86
2012:Q4
8.45
8.60
8.70
2013:Q1
8.18
8.38
8.52
2013:Q2
7.98
8.24
8.41
2013:Q3
7.76
8.07
8.28
2013:Q4
7.53
7.90
8.14
2014:Q1
7.22
7.64
7.91
2014:Q2
6.93
7.39
7.69
2014:Q3
6.66
7.17
7.49
2014:Q4
6.41
6.96
7.31
2015:Q1
6.17
6.75
7.12
2015:Q2
5.91
6.53
6.92
Period
September TB
baseline
Optimal control,
commitment
Optimal control,
discretion
2015:Q3
5.68
6.33
6.73
2015:Q4
5.47
6.14
6.55
2016:Q1
5.28
5.97
6.38
2016:Q2
5.12
5.81
6.22
2016:Q3
4.99
5.67
6.07
2016:Q4
4.87
5.53
5.92
2017:Q1
4.83
5.46
5.84
2017:Q2
4.81
5.40
5.76
2017:Q3
4.81
5.35
5.69
2017:Q4
4.83
5.31
5.63
2018:Q1
4.87
5.28
5.58
2018:Q2
4.92
5.26
5.53
2018:Q3
4.99
5.24
5.49
2018:Q4
5.07
5.24
5.45
Optimal control,
commitment
Optimal control,
discretion
2011:Q1
1.78
1.78
1.78
2011:Q2
2.51
2.51
2.51
2011:Q3
2.83
2.83
2.83
2011:Q4
2.80
2.72
2.64
2012:Q1
2.18
2.04
1.90
2012:Q2
1.83
1.62
1.41
2012:Q3
1.75
1.46
1.18
2012:Q4
1.79
1.50
1.21
2013:Q1
1.93
1.62
1.31
2013:Q2
1.96
1.64
1.31
2013:Q3
1.96
1.64
1.30
2013:Q4
1.96
1.63
1.29
2014:Q1
2.00
1.68
1.33
2014:Q2
2.04
1.71
1.36
2014:Q3
2.06
1.74
1.39
2014:Q4
2.09
1.78
1.43
2015:Q1
2.09
1.78
1.43
2015:Q2
2.10
1.79
1.44
2015:Q3
2.11
1.82
1.47
2015:Q4
2.13
1.84
1.49
2016:Q1
2.15
1.86
1.52
2016:Q2
2.18
1.89
1.55
2016:Q3
2.21
1.92
1.58
2016:Q4
2.24
1.95
1.61
2017:Q1
2.27
1.98
1.65
Period
September TB
baseline
Bottomleft panel
PCE Prices
4qtr percent change
Period
September TB
baseline
Optimal control,
commitment
Optimal control,
discretion
2017:Q2
2.30
2.01
1.68
2017:Q3
2.32
2.04
1.71
2017:Q4
2.34
2.06
1.74
2018:Q1
2.35
2.07
1.76
2018:Q2
2.35
2.09
1.79
2018:Q3
2.34
2.10
1.81
2018:Q4
2.33
2.10
1.83
Period
September TB
baseline
Bottomright panel
Lessons
Optimal policies involve commitments to hold the nominal funds rate near zero persistently.
Unemployment falls below its natural rate and inflation may rise above its target later in the decade.
Optimal policies do not result in inflation above 2½ percent for a protracted period under the modal
outlook.
Exhibit 2
Practical Approaches
Topleft panel
Strategies
Notable improvements in resource utilization were achieved by two strategies:
Inertial version of the Taylor 1999 rule
Nominal income targeting
Pricelevel targeting resulted in poorer performance, on average.
Topright panel
Nominal GDP
Billions of dollars
Period
Assumed target
September TB
2007:Q1
13,758.54
13,758.54
2007:Q2
13,976.83
13,976.83
2007:Q3
14,126.17
14,126.17
2007:Q4
14,253.16
14,253.16
2008:Q1
14,399.47
14,273.92
2008:Q2
14,547.28
14,415.46
2008:Q3
14,696.61
14,395.05
2008:Q4
14,847.47
14,081.72
2009:Q1
14,961.54
13,893.74
2009:Q2
15,076.49
13,854.08
2009:Q3
15,192.32
13,920.55
2009:Q4
15,309.04
14,087.43
2010:Q1
15,450.14
14,277.90
Period
Assumed target
September TB
2010:Q2
15,592.55
14,467.84
2010:Q3
15,736.27
14,605.47
2010:Q4
15,881.31
14,755.01
2011:Q1
16,045.63
14,867.81
2011:Q2
16,211.65
15,008.01
2011:Q3
16,379.39
15,203.68
2011:Q4
16,548.86
15,348.13
2012:Q1
16,720.41
15,456.87
2012:Q2
16,893.75
15,628.42
2012:Q3
17,068.88
15,781.92
2012:Q4
17,245.82
15,946.93
2013:Q1
17,426.82
16,109.37
2013:Q2
17,609.71
16,327.93
2013:Q3
17,794.53
16,523.00
2013:Q4
17,981.28
16,719.57
2014:Q1
18,182.10
16,941.37
2014:Q2
18,386.26
17,165.69
2014:Q3
18,593.64
17,406.28
2014:Q4
18,804.03
17,652.41
2015:Q1
19,017.48
17,919.94
2015:Q2
19,234.13
18,199.26
2015:Q3
19,454.35
18,464.79
2015:Q4
19,677.93
18,728.95
2016:Q1
19,904.95
18,988.72
2016:Q2
20,134.91
19,248.92
2016:Q3
20,367.70
19,506.77
2016:Q4
20,603.28
19,764.87
Middleleft panel
Federal Funds Rate
percent
Period
Inertial Taylor
(1999)
Nominalincome
targeting
September TB
baseline
2011:Q1
0.16
0.16
0.16
2011:Q2
0.09
0.09
0.09
2011:Q3
0.08
0.08
0.08
2011:Q4
0.12
0.12
0.12
2012:Q1
0.12
0.12
0.12
2012:Q2
0.12
0.12
0.12
2012:Q3
0.12
0.12
0.12
2012:Q4
0.12
0.12
0.12
2013:Q1
0.12
0.12
0.12
2013:Q2
0.12
0.12
0.12
2013:Q3
0.16
0.12
0.12
2013:Q4
0.24
0.12
0.12
Period
Inertial Taylor
(1999)
Nominalincome
targeting
September TB
baseline
2014:Q1
0.35
0.12
0.13
2014:Q2
0.49
0.14
0.17
2014:Q3
0.66
0.21
0.32
2014:Q4
0.86
0.33
0.56
2015:Q1
1.10
0.51
0.91
2015:Q2
1.36
0.74
1.35
2015:Q3
1.64
0.99
1.75
2015:Q4
1.93
1.28
2.11
2016:Q1
2.21
1.57
2.42
2016:Q2
2.50
1.88
2.68
2016:Q3
2.77
2.19
2.91
2016:Q4
3.03
2.49
3.11
2017:Q1
3.28
2.79
3.28
2017:Q2
3.50
3.08
3.43
2017:Q3
3.71
3.35
3.57
2017:Q4
3.89
3.60
3.68
2018:Q1
4.00
3.79
3.78
2018:Q2
4.10
3.96
3.86
2018:Q3
4.19
4.13
3.93
2018:Q4
4.26
4.28
3.99
Middlecenter panel
Unemployment Rate
percent
Period
Inertial Taylor
(1999)
Nominalincome
targeting
September TB
baseline
2011:Q1
8.93
8.93
8.93
2011:Q2
9.07
9.07
9.07
2011:Q3
9.09
9.09
9.09
2011:Q4
9.11
9.11
9.11
2012:Q1
9.07
9.07
9.10
2012:Q2
8.91
8.91
8.98
2012:Q3
8.71
8.72
8.86
2012:Q4
8.48
8.49
8.70
2013:Q1
8.21
8.23
8.52
2013:Q2
8.02
8.04
8.41
2013:Q3
7.80
7.83
8.28
2013:Q4
7.58
7.62
8.14
2014:Q1
7.28
7.31
7.91
2014:Q2
6.99
7.02
7.69
2014:Q3
6.73
6.76
7.49
2014:Q4
6.49
6.51
7.31
2015:Q1
6.25
6.27
7.12
2015:Q2
6.01
6.02
6.92
2015:Q3
5.78
5.78
6.73
Period
Inertial Taylor
(1999)
Nominalincome
targeting
September TB
baseline
2015:Q4
5.56
5.57
6.55
2016:Q1
5.36
5.37
6.38
2016:Q2
5.18
5.20
6.22
2016:Q3
5.01
5.04
6.07
2016:Q4
4.86
4.91
5.92
2017:Q1
4.79
4.86
5.84
2017:Q2
4.74
4.82
5.76
2017:Q3
4.70
4.81
5.69
2017:Q4
4.67
4.81
5.63
2018:Q1
4.66
4.84
5.58
2018:Q2
4.66
4.87
5.53
2018:Q3
4.68
4.92
5.49
2018:Q4
4.70
4.97
5.45
Middleright panel
PCE Prices
4qtr percent change
Period
Inertial Taylor
(1999)
Nominalincome
targeting
September TB
baseline
2011:Q1
1.78
1.78
1.78
2011:Q2
2.51
2.51
2.51
2011:Q3
2.83
2.83
2.83
2011:Q4
2.86
2.79
2.64
2012:Q1
2.32
2.17
1.90
2012:Q2
2.05
1.82
1.41
2012:Q3
2.05
1.75
1.18
2012:Q4
2.13
1.80
1.21
2013:Q1
2.29
1.94
1.31
2013:Q2
2.35
1.97
1.31
2013:Q3
2.37
1.98
1.30
2013:Q4
2.39
1.97
1.29
2014:Q1
2.44
2.02
1.33
2014:Q2
2.49
2.06
1.36
2014:Q3
2.53
2.08
1.39
2014:Q4
2.57
2.11
1.43
2015:Q1
2.57
2.11
1.43
2015:Q2
2.58
2.11
1.44
2015:Q3
2.59
2.13
1.47
2015:Q4
2.60
2.13
1.49
2016:Q1
2.61
2.15
1.52
2016:Q2
2.62
2.16
1.55
2016:Q3
2.63
2.18
1.58
2016:Q4
2.63
2.19
1.61
2017:Q1
2.63
2.20
1.65
2017:Q2
2.63
2.21
1.68
Inertial Taylor
(1999)
Period
Nominalincome
targeting
September TB
baseline
2017:Q3
2.62
2.21
1.71
2017:Q4
2.61
2.21
1.74
2018:Q1
2.59
2.20
1.76
2018:Q2
2.56
2.19
1.79
2018:Q3
2.53
2.18
1.81
2018:Q4
2.50
2.15
1.83
Bottom panel
Key Results
The inertial Taylor 1999 rule approach brings about a notable improvement in the unemployment rate at
the cost of higher inflation.
Nominal income targeting also improves outcomes for unemployment while bringing inflation closer to 2
percent.
Each strategy involves clear and credible commitments over the next fivetoten years.
Laying out the course of the federal funds rate or communicating the conditions that may trigger
the onset of tightening could facilitate achieving better outcomes.
Exhibit 3
Robustness
Topleft panel
Recession Scenario
Aggregate demand weakens enough to bring the unemployment rate to over 11½ percent for much of
2012 and 2013 under the baseline strategy.
For the baseline strategy we use the outcomebased rule reported in the Tealbook.
This could be interpreted as a continuation of the Committee's historical approach.
Topright panel
Federal Funds Rate
percent
Inertial Taylor
(1999)
Nominalincome
targeting
Outcomebased
rule
2011:Q1
0.16
0.16
0.16
2011:Q2
0.09
0.09
0.09
2011:Q3
0.08
0.08
0.08
2011:Q4
0.12
0.12
0.12
2012:Q1
0.12
0.12
0.12
2012:Q2
0.12
0.12
0.12
2012:Q3
0.12
0.12
0.12
2012:Q4
0.12
0.12
0.12
2013:Q1
0.12
0.12
0.12
2013:Q2
0.12
0.12
0.12
2013:Q3
0.12
0.12
0.12
2013:Q4
0.12
0.12
0.12
Period
Inertial Taylor
(1999)
Nominalincome
targeting
Outcomebased
rule
2014:Q1
0.12
0.12
0.12
2014:Q2
0.12
0.12
0.12
2014:Q3
0.12
0.12
0.12
2014:Q4
0.12
0.12
0.12
2015:Q1
0.12
0.12
0.12
2015:Q2
0.12
0.12
0.12
2015:Q3
0.14
0.12
0.12
2015:Q4
0.26
0.12
0.12
2016:Q1
0.45
0.14
0.19
2016:Q2
0.71
0.26
0.42
2016:Q3
1.02
0.46
0.77
2016:Q4
1.36
0.72
1.20
2017:Q1
1.72
1.04
1.67
2017:Q2
2.09
1.41
2.13
2017:Q3
2.46
1.81
2.56
2017:Q4
2.83
2.23
2.95
2018:Q1
3.12
2.61
3.29
2018:Q2
3.41
3.01
3.59
2018:Q3
3.68
3.42
3.84
2018:Q4
3.93
3.83
4.04
Inertial Taylor
(1999)
Nominalincome
targeting
Outcomebased
rule
2011:Q1
8.93
8.93
8.93
2011:Q2
9.07
9.07
9.07
2011:Q3
9.09
9.09
9.09
2011:Q4
9.65
9.65
9.64
2012:Q1
10.21
10.19
10.25
2012:Q2
10.79
10.72
10.90
2012:Q3
11.09
10.96
11.30
2012:Q4
11.26
11.06
11.57
2013:Q1
11.22
10.95
11.64
2013:Q2
11.15
10.82
11.68
2013:Q3
10.97
10.57
11.59
2013:Q4
10.72
10.26
11.44
2014:Q1
10.34
9.82
11.14
2014:Q2
9.93
9.36
10.80
2014:Q3
9.50
8.89
10.45
2014:Q4
9.07
8.41
10.07
2015:Q1
8.61
7.90
9.66
2015:Q2
8.11
7.37
9.22
2015:Q3
7.62
6.84
8.76
Period
Middleleft panel
Unemployment Rate
percent
Period
Inertial Taylor
(1999)
Nominalincome
targeting
Outcomebased
rule
2015:Q4
7.14
6.33
8.31
2016:Q1
6.67
5.83
7.86
2016:Q2
6.23
5.36
7.43
2016:Q3
5.81
4.93
7.02
2016:Q4
5.43
4.53
6.63
2017:Q1
5.14
4.23
6.35
2017:Q2
4.90
3.99
6.10
2017:Q3
4.69
3.79
5.89
2017:Q4
4.52
3.64
5.71
2018:Q1
4.40
3.54
5.57
2018:Q2
4.31
3.49
5.46
2018:Q3
4.25
3.49
5.38
2018:Q4
4.22
3.52
5.32
Inertial Taylor
(1999)
Nominalincome
targeting
Outcomebased
rule
2011:Q1
1.78
1.78
1.78
2011:Q2
2.51
2.51
2.51
2011:Q3
2.83
2.83
2.83
2011:Q4
2.53
2.68
2.23
2012:Q1
1.65
1.94
1.10
2012:Q2
1.02
1.46
0.17
2012:Q3
0.63
1.24
0.53
2012:Q4
0.62
1.25
0.59
2013:Q1
0.68
1.35
0.62
2013:Q2
0.66
1.36
0.70
2013:Q3
0.65
1.37
0.76
2013:Q4
0.64
1.38
0.79
2014:Q1
0.70
1.44
0.75
2014:Q2
0.77
1.52
0.70
2014:Q3
0.84
1.59
0.64
2014:Q4
0.93
1.68
0.56
2015:Q1
1.00
1.74
0.49
2015:Q2
1.09
1.82
0.39
2015:Q3
1.20
1.92
0.27
2015:Q4
1.32
2.03
0.13
2016:Q1
1.46
2.14
0.02
2016:Q2
1.60
2.27
0.19
2016:Q3
1.75
2.39
0.37
2016:Q4
1.90
2.52
0.55
2017:Q1
2.04
2.64
0.74
2017:Q2
2.19
2.76
0.93
Period
Middleright panel
PCE Prices
4qtr percent change
Period
Inertial Taylor
(1999)
Nominalincome
targeting
Outcomebased
rule
2017:Q3
2.32
2.87
1.11
2017:Q4
2.44
2.96
1.28
2018:Q1
2.54
3.04
1.44
2018:Q2
2.63
3.10
1.58
2018:Q3
2.70
3.15
1.71
2018:Q4
2.75
3.17
1.82
Period
Bottom panel
Summary
We also considered an inflationary scenario:
Nominal income targeting stabilized both unemployment and inflation.
The inertial Taylor 1999 rule stabilized unemployment, but amplified the impact on inflation.
Nominal income targeting also achieved improvements in inflation and unemployment in simulations of
other models.
Pricelevel targeting performed poorly in the FRB/US model and the small model, but well in the EDO
(DSGE) model.
Exhibit 4
Questions for Committee Discussion of Monetary Policy Frameworks
1. Under flexible inflation targeting, the central bank pursues an explicit inflation objective, maintains the
flexibility to stabilize economic activity, and seeks to communicate its forecasts and policy plans as
clearly as possible. Would you view such a framework as consistent with the Federal Reserve's dual
mandate of maximum employment and price stability? If so, do you think the Federal Reserve should
enunciate such a framework? More generally, would it be helpful to formulate a consensus statement
on the Committee's policy framework, perhaps using an approach similar to that of the exit strategy
statement that the Committee developed earlier in the year?
2. The staff memo on alternative frameworks noted that, in principle, the Committee's best choice would
be to announce and commit to the optimal policy path under commitment. Would it be helpful for the
Committee to make such conditional commitments? If so, what are the most effective way(s) to
communicate those conditional commitments, for example, by providing policy "thresholds" about the
expected future course of policy or other options illustrated in Alternative A1 of the policy alternatives
distributed on October 25?
3. The staff memo also described policy strategies that might broadly approximate commitment to the
optimal policy path, including a price level target and a nominal income target. Taking into account
their relative merits and pitfalls, under what circumstances, if any, would it be appropriate to pursue
one of these strategies?
4. What steps, if any, should the Committee take to provide more information to the public about the
expected future course of policy?
Appendix 2: Materials used by Mr. Sack
Material for
FOMC Presentation: Financial Market Developments and Desk Operations
Brian Sack
November 1, 2011
Class II FOMC Restricted FR
Exhibit 1
Topleft panel
(1)
Title: Treasury Yields
Series: 2year, 5year, 10year, and 30year Treasury yields
Horizon: August 3, 2009 October 28, 2011
Description: Treasury yields increased across the yield curve in the intermeeting period, with particularly large
moves at the longer end of the curve.
Source: Bloomberg
Topright panel
(2)
Title: Economic News Index
Series: Citigroup Economic Surprise Index
Horizon: August 3, 2009 October 28, 2011
Description: An index tracking surprises in economic data turned positive for the first time in months, indicating
that recent releases of economic data have been better than expected.
Source: Citigroup
Middleleft panel
(3)
Title: Changes in OneYear Forward Rates Over the Intermeeting Period
Series: 1year forward Treasury rate changes for start years 0, 1, 2, 3, 5, 10, 20, and 30
Horizon: September 20, 2011 October 28, 2011
Description: Forward rates at the front and middle of the Treasury yield curve increased, while those at the back
end of the yield curve decreased, indicating a change in the shape of the yield curve.
Source: Federal Reserve Board of Governors
Middleright panel
(4) Effects of September FOMC Decisions*
Variable
Movement Around
Announcement**
Dealer Estimated
Effect***
2Year Treasury
+3
+7
10Year Treasury
8
10
30Year Treasury
21
20
30Year Swap Rate
15
N/A
8
15
MBS Spread
*All figures in basis points. Return to text
** From close on day before announcement to close on day of announcement. Return to table
***Median effects as estimated in November Policy Survey. Return to table
Source: Federal Reserve Bank of New York Policy Survey, Barclays Capital, Bloomberg
Bottomleft panel
(5)
Title: Probability Distribution of First Increase in Federal Funds Target Rate
Series: Average probabilities of first increase in federal funds target rate across different quarters, as assessed in
September and November Federal Reserve Bank of New York Policy Surveys of primary dealers
Horizon: 2011:Q4 to 2014:Q1 or later
Description: Dealers pushed out their estimates for the first increase in the federal funds rate farther into the
future.
Source: Federal Reserve Bank of New York Policy Survey
Bottomright panel
(6)
Title: MBS OptionAdjusted Spread to Treasury
Series: FNMA current coupon optionadjusted spread to Treasury spliced with 3.5% coupon OAS to Treasury
when current coupon rate is below 3.5%
Horizon: March 3, 2011 October 28, 2011
Description: MBS spreads tightened in the intermeeting period, with a particularly pronounced tightening directly
after the September FOMC and some subsequent intermeeting volatility.
Source: Barclays Capital
Exhibit 2
Topleft panel
(7)
Title: Equity Prices
Series: S&P 500 and EuroStoxx Index, indexed to 4/1/2010
Horizon: April 1, 2010 October 28, 2011
Description: Domestic and European stocks increased sharply in the intermeeting period.
Source: Bloomberg
Topright panel
(8)
Title: Corporate Bond Spreads to Treasury
Series: Bank of AmericaMerrill Lynch indices of high yield and investment grade bond spreads to Treasuries
Horizon: April 1, 2010 October 28, 2011
Description: After initially widening, bond spreads fell fairly significantly in the latter part of the intermeeting
period.
Source: Bank of AmericaMerrill Lynch
Middleleft panel
(9)
Title: Dollar Exchange Rates
Series: Dollareuro exchange rate, Federal Reserve Board of Governors' tradeweighted dollar measure, and
dollaryen exchange rate
Horizon: April 1, 2010 October 28, 2011
Description: The dollar depreciated against major currencies in the intermeeting period after exhibiting signs of
strength early in the period. It remains particularly low against the yen.
Source: Bloomberg, Federal Reserve Board of Governors
Middleright panel
(10)
Title: Euro Area Sovereign Debt Spreads
Series: Spanish, Italian, and French 10year spreads to Germany
Horizon: April 1, 2010 October 28, 2011
Description: Spanish, Italian, and French debt spreads to Germany remain elevated as compared to recent
levels, with some notable volatility in recent weeks.
Source: Bloomberg
Bottomleft panel
(11)
Title: Dollar Funding Spreads to OIS
Series: Spreads of 3month, 3months forward Libor and spot Libor to OIS
Horizon: April 1, 2010 October 28, 2011
Description: These measures of funding stress remain somewhat elevated, with the LiborOIS spread rising
slowly but steadily over the intermeeting period.
Source: Bloomberg
Bottomright panel
(12)
Title: 5Year Financial CDS Spreads
Series: Morgan Stanley, Goldman Sachs, and JP Morgan 5year credit default swap spreads
Horizon: January 1, 2011 October 28, 2011
Description: After spiking after the September FOMC, CDS spreads for Morgan Stanley and Goldman Sachs
retraced to levels similar to those at the September FOMC. The cost of protection against losses on JP Morgan's
debt, however, has not exhibited much change.
Source: Markit
Exhibit 3
Topleft panel
(13)
Title: Treasury Market Cost of Transacting
Series: Price impact of simultaneously buying and selling $500 million of benchmark 2year and 10year
securities, calculated using five best bids and offers
Horizon: April 1, 2010 October 28, 2011
Description: The Treasury market continues to function normally as exhibited by this metric.
Source: Brokertec, Federal Reserve Bank of New York
Topright panel
(14)
Title: SOMA Purchases and Gross Issuance (Projections Through June 2012)
Series: Forecasted SOMA purchases and market issuance of 68 year, 810 year, 1020 year, and 2030 year
Treasuries, 630 year TIPS, and MBS*
Horizon: October 2011 June 2012
Description: The Maturity Extension Program is forecasted to absorb the equivalent of roughly half of new
issuance of Treasuries up to 10 years, a significant amount of issuance in the 1030 year sector, and very few
TIPS. The MBS reinvestment program is forecasted to absorb roughly half of new issuance of MBS.
* Projections based on gross issuance of lowcoupon securities. Return to text
Source: Federal Reserve Bank of New York
Middleleft panel
(15)
Title: Probability of Additional Policy Actions
Series: November Dealer Survey additional policy action responses
Horizon: Current meeting to 1 year
Description: Respondents did not expect any further easing at the current meeting, but there was some
expectation for further easing within the next year.
Policy actions shown in the chart are "Increase SOMA Duration," "Reduce IOER," "Provide SOMA Guidance," "Increase SOMA Size," and
"Change Rate Guidance."
Source: Federal Reserve Bank of New York Policy Survey
Middleright panel
(16)
Title: Expected SOMA Portfolio Holdings
Series: SOMA portfolio holdings (through 10/14/11), November Dealer Survey responses to the expected size of
the portfolio (after 10/14/11)
Horizon: January 1, 2007 December 31, 2016
Description: Some dealers are incorporating further asset purchases into their forecasts for the SOMA portfolio,
although the median forecast is for no further expansion and a slow rolling down of the portfolio starting in 2014.
Source: Federal Reserve Bank of New York Policy Survey
Bottomleft panel
(17)
Title: Euro RRP Rate Offers on 10/28/2011
Series: Spot/next offers, excluding Goldman Sachs' offers, to the New York Fed's trading desk in reverse
repurchase transactions on October 28, 2011
Horizon: October 28, 2011
Description: On the first day of differentiating between different types of European collateral in the Fed's reverse
repurchase agreements for its euro portfolio, rate offers were as expected, with higher rates for potentially riskier
collateral and relatively tight offer ranges across counterparties.
Source: Federal Reserve Bank of New York
Bottomright panel
(18) Liability Structure of Financial Institutions*
Type
MF Global
MS
JPM
Repo & Trading Liabilities
61%
36%
15%
LT Unsecured Debt
1%
24%
12%
Deposits
0%
8%
47%
Other Liabilities
35%
24%
18%
Equity
3%
8%
8%
Total
100%
100% 100%
* Expressed as percent of assets. Return to text
Source: MF Global, Morgan Stanley, JP Morgan
Appendix 3: Materials used by Mr. Wilcox
Material for Forecast Summary
David Wilcox
November 1, 2011
Forecast Summary
Confidence Intervals Based on Tealbook Track Record
Topleft panel
Real GDP
Percent change, annual rate
Period
October Tealbook
September Tealbook
2010:Q1
3.94
ND
2010:Q2
3.79
ND
2010:Q3
2.51
ND
2010:Q4
2.35
ND
2011:Q1
0.36
ND
2011:Q2
1.34
1.34
2011:Q3
2.68
2.47
2011:Q4
2.50
1.98
2012:Q1
2.36
2.17
2012:Q2
2.46
2.33
2012:Q3
2.58
2.72
2012:Q4
2.69
3.02
2013:Q1
2.94
3.20
2013:Q2
3.14
3.30
2013:Q3
3.35
3.50
2013:Q4
3.52
3.60
Forecast
The 70% confidence interval begins at about 1.34 in 2011:Q2, follows the contour of the October Tealbook curve, and ends at about
[1.4,5.2].
Topright panel
PCE Prices
Percent change, annual rate
Period
October Tealbook
September Tealbook
2010:Q1
1.86
ND
2010:Q2
0.33
ND
2010:Q3
0.98
ND
2010:Q4
1.95
ND
2011:Q1
3.90
ND
2011:Q2
3.30
3.30
2.33
2.26
Forecast
2011:Q3
Period
October Tealbook
September Tealbook
2011:Q4
1.20
1.21
2012:Q1
1.43
0.92
2012:Q2
1.38
1.25
2012:Q3
1.35
1.33
2012:Q4
1.34
1.35
2013:Q1
1.39
1.30
2013:Q2
1.36
1.27
2013:Q3
1.37
1.29
2013:Q4
1.39
1.30
The 70% confidence interval begins at about 3.30 in 2011:Q2, follows the contour of the October Tealbook curve, and ends at about
[0.1,2.6].
Middleleft panel
Unemployment Rate
Percent
Period
October Tealbook
September Tealbook
2010:Q1
9.70
ND
2010:Q2
9.60
ND
2010:Q3
9.60
ND
2010:Q4
9.60
ND
2011:Q1
8.90
ND
2011:Q2
9.10
9.10
2011:Q3
9.09
9.09
2011:Q4
9.08
9.11
2012:Q1
9.03
9.10
2012:Q2
8.90
8.98
2012:Q3
8.76
8.86
2012:Q4
8.60
8.70
2013:Q1
8.44
8.52
2013:Q2
8.36
8.41
2013:Q3
8.27
8.28
2013:Q4
8.14
8.14
Forecast
The 70% confidence interval begins at about 9.10 in 2011:Q2, follows the contour of the October Tealbook curve, and ends at about
[7.05,9.25].
Middleright panel
PCE Prices Excluding Food and Energy
Percent change, annual rate
Period
October Tealbook
September Tealbook
2010:Q1
1.13
ND
2010:Q2
1.28
ND
2010:Q3
0.75
ND
2010:Q4
0.66
ND
2011:Q1
1.56
ND
Period
October Tealbook
2011:Q2
September Tealbook
2.26
2.26
2011:Q3
2.07
2.10
2011:Q4
1.47
1.66
2012:Q1
1.64
1.64
2012:Q2
1.57
1.51
2012:Q3
1.46
1.43
2012:Q4
1.40
1.41
2013:Q1
1.40
1.33
2013:Q2
1.40
1.31
2013:Q3
1.40
1.35
2013:Q4
1.41
1.35
Forecast
The 70% confidence interval begins at about 2.26 in 2011:Q2, follows the contour of the October Tealbook curve, and ends at about
[0.5,2.25].
Bottomleft panel
Change in Private Payroll Employment
Thousands of employees
Period
Threemonth moving average
January 2000
241.67
February 2000
188.33
March 2000
216.00
April 2000
216.67
May 2000
145.00
June 2000
103.67
July 2000
92.33
August 2000
143.00
September 2000
147.67
October 2000
79.33
November 2000
139.00
December 2000
94.00
January 2001
85.33
February 2001
12.67
March 2001
40.33
April 2001
134.67
May 2001
159.00
June 2001
215.33
July 2001
163.33
August 2001
199.00
September 2001
209.33
October 2001
273.00
November 2001
325.67
December 2001
305.67
January 2002
234.67
February 2002
172.33
Period
Threemonth moving average
March 2002
125.00
April 2002
106.67
May 2002
80.33
June 2002
54.67
July 2002
54.33
August 2002
46.33
September 2002
54.33
October 2002
13.33
November 2002
27.33
December 2002
25.33
January 2003
42.33
February 2003
90.00
March 2003
99.67
April 2003
130.00
May 2003
71.33
June 2003
18.00
July 2003
7.33
August 2003
3.00
September 2003
63.67
October 2003
112.00
November 2003
113.67
December 2003
96.00
January 2004
105.00
February 2004
103.33
March 2004
167.00
April 2004
184.67
May 2004
277.33
June 2004
209.00
July 2004
148.33
August 2004
79.00
September 2004
98.33
October 2004
193.67
November 2004
168.67
December 2004
162.33
January 2005
85.00
February 2005
153.00
March 2005
157.00
April 2005
240.67
May 2005
211.33
June 2005
250.00
July 2005
228.00
August 2005
242.67
September 2005
183.67
October 2005
122.33
November 2005
161.33
Period
Threemonth moving average
December 2005
180.00
January 2006
253.00
February 2006
246.67
March 2006
286.00
April 2006
236.00
May 2006
143.33
June 2006
84.00
July 2006
81.67
August 2006
127.67
September 2006
129.67
October 2006
78.67
November 2006
93.33
December 2006
120.00
January 2007
194.67
February 2007
150.67
March 2007
152.67
April 2007
91.67
May 2007
113.00
June 2007
76.00
July 2007
59.33
August 2007
5.33
September 2007
October 2007
19.00
2.67
November 2007
52.00
December 2007
61.00
January 2008
54.33
February 2008
16.00
March 2008
69.00
April 2008
154.33
May 2008
181.00
June 2008
220.67
July 2008
235.33
August 2008
261.33
September 2008
326.00
October 2008
399.67
November 2008
567.33
December 2008
645.00
January 2009
764.67
February 2009
740.67
March 2009
783.67
April 2009
771.33
May 2009
633.67
June 2009
513.33
July 2009
344.67
August 2009
313.67
Period
Threemonth moving average
September 2009
233.00
October 2009
211.67
November 2009
152.67
December 2009
131.33
January 2010
67.33
February 2010
62.33
March 2010
24.67
April 2010
102.33
May 2010
139.33
June 2010
123.00
July 2010
89.33
August 2010
104.00
September 2010
111.67
October 2010
146.33
November 2010
148.33
December 2010
156.67
January 2011
131.00
February 2011
172.00
March 2011
212.33
April 2011
260.67
May 2011
211.00
June 2011
158.00
July 2011
128.33
August 2011
109.67
September 2011
147.67
Shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research: March 2001November
2001, and December 2007June 2009.
Bottomright panel
Consumer Sentiment
Period
University of Michigan
(1966 = 100)
Conference Board
(1985 = 100)
January 2000
112.00
144.70
February 2000
111.30
140.80
March 2000
107.10
137.10
April 2000
109.20
137.70
May 2000
110.70
144.70
June 2000
106.40
139.20
July 2000
108.30
143.00
August 2000
107.30
140.80
September 2000
106.80
142.50
October 2000
105.80
135.80
November 2000
107.60
132.60
December 2000
98.40
128.60
January 2001
94.70
115.70
Period
University of Michigan
(1966 = 100)
Conference Board
(1985 = 100)
February 2001
90.60
109.20
March 2001
91.50
116.90
April 2001
88.40
109.90
May 2001
92.00
116.10
June 2001
92.60
118.90
July 2001
92.40
116.30
August 2001
91.50
114.00
September 2001
81.80
97.00
October 2001
82.70
85.30
November 2001
83.90
84.90
December 2001
88.80
94.60
January 2002
93.00
97.80
February 2002
90.70
95.00
March 2002
95.70
110.70
April 2002
93.00
108.50
May 2002
96.90
110.30
June 2002
92.40
106.30
July 2002
88.10
97.40
August 2002
87.60
94.50
September 2002
86.10
93.70
October 2002
80.60
79.60
November 2002
84.20
84.90
December 2002
86.70
80.70
January 2003
82.40
78.80
February 2003
79.90
64.80
March 2003
77.60
61.40
April 2003
86.00
81.00
May 2003
92.10
83.60
June 2003
89.70
83.50
July 2003
90.90
77.00
August 2003
89.30
81.70
September 2003
87.70
77.00
October 2003
89.60
81.70
November 2003
93.70
92.50
December 2003
92.60
94.80
January 2004
103.80
97.70
February 2004
94.40
88.50
March 2004
95.80
88.50
April 2004
94.20
93.00
May 2004
90.20
93.10
June 2004
95.60
102.80
July 2004
96.70
105.70
August 2004
95.90
98.70
September 2004
94.20
96.70
October 2004
91.70
92.90
Period
University of Michigan
(1966 = 100)
Conference Board
(1985 = 100)
November 2004
92.80
92.60
December 2004
97.10
102.70
January 2005
95.50
105.10
February 2005
94.10
104.40
March 2005
92.60
103.00
April 2005
87.70
97.50
May 2005
86.90
103.10
June 2005
96.00
106.20
July 2005
96.50
103.60
August 2005
89.10
105.50
September 2005
76.90
87.50
October 2005
74.20
85.20
November 2005
81.60
98.30
December 2005
91.50
103.80
January 2006
91.20
106.80
February 2006
86.70
102.70
March 2006
88.90
107.50
April 2006
87.40
109.80
May 2006
79.10
104.70
June 2006
84.90
105.40
July 2006
84.70
107.00
August 2006
82.00
100.20
September 2006
85.40
105.90
October 2006
93.60
105.10
November 2006
92.10
105.30
December 2006
91.70
110.00
January 2007
96.90
110.20
February 2007
91.30
111.20
March 2007
88.40
108.20
April 2007
87.10
106.30
May 2007
88.30
108.50
June 2007
85.30
105.30
July 2007
90.40
111.90
August 2007
83.40
105.60
September 2007
83.40
99.50
October 2007
80.90
95.20
November 2007
76.10
87.80
December 2007
75.50
90.60
January 2008
78.40
87.30
February 2008
70.80
76.40
March 2008
69.50
65.90
April 2008
62.60
62.80
May 2008
59.80
58.10
June 2008
56.40
51.00
July 2008
61.20
51.90
Period
University of Michigan
(1966 = 100)
Conference Board
(1985 = 100)
August 2008
63.00
58.50
September 2008
70.30
61.40
October 2008
57.60
38.80
November 2008
55.30
44.70
December 2008
60.10
38.60
January 2009
61.20
37.40
February 2009
56.30
25.30
March 2009
57.30
26.90
April 2009
65.10
40.80
May 2009
68.70
54.80
June 2009
70.80
49.30
July 2009
66.00
47.40
August 2009
65.70
54.50
September 2009
73.50
53.40
October 2009
70.60
48.70
November 2009
67.40
50.60
December 2009
72.50
53.60
January 2010
74.40
56.50
February 2010
73.60
46.40
March 2010
73.60
52.30
April 2010
72.20
57.70
May 2010
73.60
62.70
June 2010
76.00
54.30
July 2010
67.80
51.00
August 2010
68.90
53.20
September 2010
68.20
48.60
October 2010
67.70
49.90
November 2010
71.60
57.80
December 2010
74.50
63.40
January 2011
74.20
64.80
February 2011
77.50
72.00
March 2011
67.50
63.80
April 2011
69.80
66.00
May 2011
74.30
61.70
June 2011
71.50
57.60
July 2011
63.70
59.20
August 2011
55.80
45.20
September 2011
59.50
46.40
October 2011
60.80
40.90
Shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research: March 2001November
2001, and December 2007June 2009.
Appendix 4: Material distributed by Ms. Leonard
Material for Briefing on
FOMC Participants' Economic Projections
Deborah Leonard
November 1, 2011
Exhibit 1. Central tendencies and ranges of economic projections, 201114 and over the
longer run
Actual values for years 2006 through 2010.
Change in real GDP
Percent
2006
2007
2008
2009
2010
2011
2012
2013
2014
Longer run
2.4
2.2
3.3
0.5
3.1
Upper End of Range
1.8
3.5
4.0
4.5
3.0
Upper End of Central Tendency
1.7
2.9
3.5
3.9
2.7
Lower End of Central Tendency
1.6
2.5
3.0
3.0
2.4
Lower End of Range
1.6
2.3
2.7
2.7
2.2
2006
2007
2008
2009
2010
2011
2012
2013
2014
Longer run
Actual
Unemployment rate
Percent
Actual
4.5
4.8
6.9
10.0
9.6
Upper End of Range
9.1
8.9
8.4
8.0
6.0
Upper End of Central Tendency
9.1
8.7
8.2
7.7
6.0
Lower End of Central Tendency
9.0
8.5
7.8
6.8
5.2
Lower End of Range
8.9
8.1
7.5
6.5
5.0
2006
2007
2008
2009
2010
2011
2012
2013
2014
Longer run
1.9
3.5
1.7
1.5
1.3
Upper End of Range
3.3
2.8
2.5
2.4
2.0
Upper End of Central Tendency
2.9
2.0
2.0
2.0
2.0
Lower End of Central Tendency
2.7
1.4
1.5
1.5
1.7
Lower End of Range
2.5
1.4
1.4
1.5
1.5
2006
2007
2008
2009
2010
2011
2012
2013
2014
2.3
2.4
2.0
1.7
1.0
Upper End of Range
2.0
2.1
2.1
2.2
Upper End of Central Tendency
1.9
2.0
1.9
2.0
Lower End of Central Tendency
1.8
1.5
1.4
1.5
Lower End of Range
1.7
1.3
1.4
1.4
PCE inflation
Percent
Actual
Core PCE inflation
Percent
Actual
Exhibit 2. Economic projections for 2011 (percent)
Change in real GDP
2011
2011:H1
2011:H2
Central Tendency 1.6 to 1.7 0.8 to 0.8 2.4 to 2.6
June projections 2.7 to 2.9 2.0 to 2.1 3.3 to 3.6
Range
1.6 to 1.8 0.8 to 0.8 2.4 to 2.8
June projections 2.5 to 3.0 1.9 to 2.2 2.9 to 4.0
Memo: Tealbook
June Tealbook
1.7
0.8
2.6
2.7
2.0
3.4
2011:H1
2011:H2
Unemployment Rate
2011:Q4
Central Tendency
9.0 to 9.1
June projections 8.6 to 8.9
Range
8.9 to 9.1
June projections 8.4 to 9.1
Memo: Tealbook
June Tealbook
9.1
8.9
PCE Inflation
2011
Central Tendency 2.7 to 2.9 3.6 to 3.6 1.8 to 2.2
June projections 2.3 to 2.5 3.5 to 3.6 1.0 to 1.7
Range
2.5 to 3.3 3.6 to 3.6 1.4 to 3.0
June projections 2.1 to 3.5 3.1 to 4.0 0.6 to 3.0
Memo: Tealbook
June Tealbook
2.7
3.6
1.8
2.3
3.6
1.1
2011
2011:H1
2011:H2
Core PCE Inflation
Central Tendency 1.8 to 1.9 1.9 to 1.9 1.7 to 1.9
June projections 1.5 to 1.8 1.7 to 1.8 1.3 to 1.8
Range
1.7 to 2.0 1.9 to 2.0 1.5 to 2.1
June projections 1.5 to 2.3 1.6 to 1.9 1.2 to 2.7
Memo: Tealbook
June Tealbook
1.8
1.9
1.8
1.7
1.8
1.5
Note: For change in real GDP and inflation, the values for 2011, 2011:H1, and 2011:H2 are at annual rates in
percent, measured in terms of Q4/Q4, Q2/Q4, and Q4/Q2, respectively.
Exhibit 3. Economic projections for 20122014 and over the longer run (percent)
Change in real GDP
2012
2013
2014
Central Tendency 2.5 to 2.9 3.0 to 3.5 3.0 to 3.9
June projections 3.3 to 3.7 3.5 to 4.2
Range
2.3 to 3.5 2.7 to 4.0 2.7 to 4.5
June projections 2.2 to 4.0 3.0 to 4.5
Memo: Tealbook
June Tealbook
Longer run
2.4 to 2.7
2.5 to 2.8
2.2 to 3.0
2.4 to 3.0
2.5
3.2
3.9
2½
3.5
4.2
4.0
2½
Unemployment rate
2012
2013
2014
Central Tendency 8.5 to 8.7 7.8 to 8.2 6.8 to 7.7
June projections 7.8 to 8.2 7.0 to 7.5
Range
8.1 to 8.9 7.5 to 8.4 6.5 to 8.0
June projections 7.5 to 8.7 6.5 to 8.3
Memo: Tealbook
June Tealbook
Longer run
5.2 to 6.0
5.2 to 5.6
5.0 to 6.0
5.0 to 6.0
8.6
8.1
7.3
5¼
8.1
7.1
6.0
5¼
2012
2013
2014
Longer run
PCE inflation
Central Tendency 1.4 to 2.0 1.5 to 2.0 1.5 to 2.0
June projections 1.5 to 2.0 1.5 to 2.0
Range
1.4 to 2.8 1.4 to 2.5 1.5 to 2.4
June projections 1.2 to 2.8 1.3 to 2.5
Memo: Tealbook
June Tealbook
1.7 to 2.0
1.7 to 2.0
1.5 to 2.0
1.5 to 2.0
1.4
1.4
1.5
2
1.5
1.5
1.5
2
2012
2013
2014
Core PCE inflation
Central Tendency 1.5 to 2.0 1.4 to 1.9 1.5 to 2.0
June projections 1.4 to 2.0 1.4 to 2.0
Range
1.3 to 2.1 1.4 to 2.1 1.4 to 2.2
June projections 1.2 to 2.5 1.3 to 2.5
Memo: Tealbook
June Tealbook
1.5
1.4
1.4
1.5
1.5
1.6
Note: The changes in real GDP and inflation are measured Q4/Q4
Exhibit 4. Risks and uncertainty in economic projections
Uncertainty about GDP growth
Number of participants
Lower
Similar
Higher
November projections
0
1
16
June projections
0
4
13
Risks to GDP growth
Number of participants
Downside
Balanced
Upside
November projections
11
6
0
June projections
11
6
0
Uncertainty about Unemployment
Number of participants
Lower
Similar
Higher
November projections
0
3
14
June projections
0
4
13
Risks to Unemployment
Number of participants
Downside
Balanced
Upside
November projections
0
6
11
June projections
0
8
9
Uncertainty about PCE inflation
Number of participants
Lower
Similar
Higher
November projections
1
4
12
June projections
1
2
14
Risks to PCE inflation
Number of participants
Downside
Balanced
Upside
November projections
4
10
3
June projections
1
10
6
Uncertainty about Core PCE inflation
Number of participants
Lower
Similar
Higher
November projections
1
5
11
June projections
1
4
12
Risks to Core PCE inflation
Number of participants
Downside
Balanced
Upside
November projections
4
10
3
June projections
2
9
6
Appendix 5: Material distributed by Ms. Mester
Material for Briefing on
TrialRun Policy Projections
Loretta J. Mester
November 1, 2011
Exhibit 1: Central tendencies and ranges
Top panel
Fed Funds Rate
(percent)
2011
2012
2013
2014
Longer run
Central Tendency 0.13 to 0.13 0.13 to 0.67 0.13 to 1.50 0.13 to 2.50
4.00 to 4.50
Range
3.75 to 4.75
0.13 to 0.50 0.13 to 1.50 0.13 to 2.50 0.13 to 4.00
Note: Projections of the target federal funds rate in the fourth quarter of the year indicated. The fed funds rate projection corresponds to
the participant's assessment of appropriate monetary policy.
Bottom panel
Fed Funds Rate
Percent
2006
2007
2008
2009
2010
2011
2012
2013
2014
Longer Run
2006
2007
2008
2009
2010
2011
2012
2013
2014
Longer Run
5.25
4.52
1.04
0.13
0.13
Upper End of Range
0.50
1.50
2.50
4.00
4.75
Upper End of Central Tendency
0.13
0.67
1.50
2.50
4.50
Lower End of Central Tendency
0.13
0.13
0.13
0.13
4.00
Lower End of Range
0.13
0.13
0.13
0.13
3.75
Actual
Exhibit 2. Distribution of federal funds rate projections
Histograms, five panels.
Number of participants
Percent range
2011
2012
2013
2014
Longer run
0.0 0.3
16
13
11
5
0
0.4 0.7
1
1
1
2
0
0.8 1.1
0
2
1
4
0
1.2 1.5
0
1
2
0
0
1.6 1.9
0
0
0
1
0
2.0 2.3
0
0
1
0
0
2.4 2.7
0
0
1
3
0
2.8 3.1
0
0
0
1
0
3.2 3.5
0
0
0
0
0
3.6 3.9
0
0
0
0
3
4.0 4.3
0
0
0
1
9
4.4 4.7
0
0
0
0
4
4.8 5.1
0
0
0
0
1
5.2 5.5
0
0
0
0
0
5.6 5.9
0
0
0
0
0
Exhibit 3. Distribution of participants' projections for year of first fed funds
rate increase
Top panel
Projected year Number of participants
2011
1
2012
3
2013
2
2014
7
2015
3
2016
1
Bottom panel
Key factors underlying policy path:
For those favoring liftoff in 2014 or later:
Slow growth and high unemployment + moderate inflation
Large and persistent output and unemployment gaps
Zero lower bound is limiting support of monetary policy
For those favoring liftoff in 2013 or earlier:
Stronger inflation pressures despite elevated unemployment
To forestall buildup of financial and structural imbalances
To keep inflation expectations anchored
Exhibit 4. Projections aligned by year of liftoff
Panel A. Central tendencies and ranges in 2011, the year before liftoff, and the year of liftoff *
Percent
Change in Real GDP
2011
Year
before
first
rise
Unemployment Rate
Year
of
first
rise
2011
Year
before
first
rise
PCE Inflation
Year
of
first
rise
2011
Year
before
first
rise
Year
of
first
rise
Upper End of Range
1.8
4.0
4.5
9.1
9.6
9.0
3.3
3.0
2.9
Upper End of Central Tendency
1.7
3.8
4.1
9.1
8.9
8.1
2.9
2.8
2.2
Lower End of Central Tendency
1.6
2.6
2.8
9.0
7.7
6.6
2.7
1.5
1.6
Lower End of Range
1.6
1.6
1.7
8.9
7.2
6.5
2.5
1.3
1.5
* Projections for the year before the first federal funds rate increase (i.e., for the year before liftoff) are not available for the participant
projecting this increase will occur in 2016. Return to text
Panel B. Scatter plots of projections in year of liftoff*
Bottomleft panel
Plotted point
Change in Real GDP
Unemployment Rate
1
1.7
9.0
2
2.5
8.7
3
2.7
7.5
4
2.8
8.8
5 (Liftoff in 2014)
2.9
8.0
6
3.2
7.9
7 (Liftoff in 2012)
3.2
8.1
8
3.3
7.6
9
3.4
7.1
10
3.5
6.5
11
3.8
7.5
12
3.9
7.3
13
4.0
6.5
14
4.1
6.6
15
4.2
6.9
16
4.3
6.5
17
4.5
6.7
Bottomcenter panel
Plotted point
Change in Real GDP
Plotted point
Change in Real GDP
PCE Inflation
PCE Inflation
1
1.7
2.9
2
2.5
2.0
3
2.7
2.2
4
2.8
2.0
5
2.9
1.9
6
3.2
1.7
7
3.2
2.2
8
3.3
2.0
9
3.4
1.6
10
3.5
2.9
11
3.8
2.5
12
3.9
1.5
13
4.0
1.8
14
4.1
1.5
15
4.2
1.5
16
4.3
2.0
17
4.5
2.0
Bottomright panel
Plotted point
Unemployment Rate
PCE Inflation
1
6.5
1.8
2
6.5
2.0
3
6.5
2.9
4
6.6
1.5
5
6.7
2.0
6
6.9
1.5
7
7.1
1.6
8
7.3
1.5
9
7.5
2.2
10
7.5
2.5
11
7.6
2.0
12
7.9
1.7
13
8.0
1.9
14
8.1
2.2
15
8.7
2.0
16
8.8
2.0
17
9.0
2.9
* Each dot represents the combination of projected values of the two variables for an individual participant. Return to text
Appendix 6: Material distributed by Mr. English
Material for
FOMC Briefing on Monetary Policy Alternatives
Bill English
November 2, 2011
Table 1: Overview of Alternatives for the Nov. 2 FOMC Statement
Selected
Elements
November Alternatives
September
Statement
A1
A2
B
C
unchanged
unchanged
unchanged
cut to $200 billion;
complete by
end of March 2012
unchanged
unchanged
unchanged
unchanged
none
none
$600 billion of
Treasuries
by end of Sept. 2012
OR
$300 billion each of
Treasuries and
agency MBS
by end of June 2012
none
none
at least through
mid2013
at least through
mid2014
unchanged
unchanged
at least through
2012
Balance Sheet
MEP
$400 billion;
complete by
end of June 2012
payments of agency
debt and MBS into
Reinvestments
agency MBS;
Treasuries into
Treasuries
Additional
Purchases
Forward Guidance
First Option
Second Option
through end of 2014
and forecasts of
unemployment and
inflation at that time
Third Option
at least as long as
unemployment and
inflation conditions
hold; expect such
conditions to prevail
through end of 2014
at least for the next at least for the next
six to seven quarters
four quarters
September FOMC Statement
1. Information received since the Federal Open Market Committee met in August indicates that economic growth
remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the
unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent
months despite some recovery in sales of motor vehicles as supplychain disruptions eased. Investment in
nonresidential structures is still weak, and the housing sector remains depressed. However, business investment
in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as
prices of energy and some commodities have declined from their peaks. Longerterm inflation expectations have
remained stable.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.
The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates
that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent
with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in
global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels
at or below those consistent with the Committee's dual mandate as the effects of past energy and other
commodity price increases dissipate further. However, the Committee will continue to pay close attention to the
evolution of inflation and inflation expectations.
3. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent
with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities.
The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining
maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3
years or less. This program should put downward pressure on longerterm interest rates and help make broader
financial conditions more accommodative. The Committee will regularly review the size and composition of its
securities holdings and is prepared to adjust those holdings as appropriate.
4. To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its
holdings of agency debt and agency mortgagebacked securities in agency mortgagebacked securities. In
addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.
5. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently
anticipates that economic conditionsincluding low rates of resource utilization and a subdued outlook for inflation
over the medium runare likely to warrant exceptionally low levels for the federal funds rate at least through mid
2013.
6. The Committee discussed the range of policy tools available to promote a stronger economic recovery in a
context of price stability. It will continue to assess the economic outlook in light of incoming information and is
prepared to employ its tools as appropriate.
[Note: In the November FOMC Statement Alternatives, emphasis (strikethrough) indicates strikethrough text,
strong emphasis (bold) indicates bold red underlined text, and curly brackets { } indicate bold blue underlined text,
respectively, in the original document.]
November FOMC StatementAlternative A1
1. Information received since the Federal Open Market Committee met in August September indicates that
economic growth remains slow strengthened somewhat in the third quarter, but the pickup was due
predominantly to a reversal of the temporary factors that had weighed on growth earlier in the year.
Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate
remains elevated. Household spending has been increaseding at only a modest a somewhat faster pace in
recent months despite some recovery in sales of motor vehicles as supply chain disruptions have eased. However,
Business investment in equipment and software has continueds to expand, but investment in nonresidential
structures is still weak and the housing sector remains depressed. Inflation appears to have has moderated since
earlier in the year as prices of energy and some commodities have declined from their peaks. Longerterm
inflation expectations have remained stable.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.
The Committee continues to expect some pickup in the a moderate pace of recovery economic growth over
coming quarters but and consequently anticipates that the unemployment rate will decline only gradually toward
levels that the Committee judges to be consistent with its dual mandate. Moreover However, there are significant
downside risks to the economic outlook, including strains in global financial markets. The Committee also
anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the
Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further.
However, The Committee will continue to pay close attention to the evolution of inflation and inflation
expectations.
3. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent
with the dual mandate, the Committee decided today to continue its program to extend the average maturity of
its holdings of securities as announced in September. The Committee intends to purchase, by the end of June
2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal
amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward
pressure on longerterm interest rates and help make broader financial conditions more accommodative. To help
support conditions in mortgage markets, The Committee will now is maintaining its existing policies of
reinvesting principal payments from its holdings of agency debt and agency mortgagebacked securities in agency
mortgagebacked securities. In addition the Committee will maintain its existing policy and of rolling over
maturing Treasury securities at auction. The Committee will regularly review the size and composition of its
securities holdings and is prepared to adjust those holdings as appropriate.
4. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent. and
currently The Committee now anticipates that economic conditionsincluding low rates of resource utilization and
a subdued outlook for inflation over the medium runare likely to warrant exceptionally low levels for the federal
funds rate at least through mid2013 mid2014.
OR
4′. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent. and
currently The Committee now anticipates that economic conditionsincluding low rates of resource utilization and
a subdued outlook for inflation over the medium runare likely to warrant this exceptionally low levels range for
the federal funds rate at least through mid2013 through the end of 2014. On the basis of currently available
information, the Committee projects the unemployment rate to be about [ 6½ to 7 ] percent and the
inflation rate (as measured by the price index for Personal Consumption Expenditures) to be around [
1¾ to 2¼ ] percent at that time.
OR
4″. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent. and
currently The Committee anticipates that economic conditionsincluding low rates of resource utilization and a
subdued outlook for inflation over the medium runare likely to warrant this exceptionally low levels range for the
federal funds rate will be appropriate at least as long as the unemployment rate exceeds [ 7 ] percent,
inflation (as measured by the price index for Personal Consumption Expenditures) is projected to be at
or below [ 2½ ] percent in the medium term, and longerterm inflation expectations continue to be well
anchored. On the basis of currently available information, the Committee expects these conditions to
prevail through the end of 2014.
5. The Committee discussed the range of policy tools available will continue to assess the economic outlook in
light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic
recovery in a context of price stability.
November FOMC StatementAlternative A2
1. Information received since the Federal Open Market Committee met in August September indicates that
economic growth remains slow strengthened somewhat in the third quarter, but the pickup was due
predominantly to a reversal of the temporary factors that had weighed on growth earlier in the year.
Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate
remains elevated. Household spending has been increaseding at only a modest a somewhat faster pace in
recent months despite some recovery in sales of motor vehicles as supply chain disruptions have eased. However,
Business investment in equipment and software has continueds to expand, but investment in nonresidential
structures is still weak and the housing sector remains depressed. Inflation appears to have has moderated since
earlier in the year as prices of energy and some commodities have declined from their peaks. Longerterm
inflation expectations have remained stable.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.
The Committee continues to expects some pickup in the pace of recovery economic growth over coming
quarters to be relatively modest but and consequently anticipates that the unemployment rate will decline only
gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover However,
there are significant downside risks to the economic outlook, including strains in global financial markets. The
Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent
with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate
further. However, The Committee will continue to pay close attention to the evolution of inflation and inflation
expectations.
3. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent
with the dual mandate, the Committee decided today to continue its program to extend the average maturity of
its holdings of securities as announced in September. The Committee intends to purchase, by the end of June
2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal
amount of Treasury securities with remaining maturities of 3 years or less. In addition, the Committee intends
to purchase a further [ $600 billion of longerterm Treasury securities by the end of September 2012 |
$300 billion of longerterm Treasury securities and $300 billion of agency mortgagebacked securities by
the end of June 2012 ]. This These programs should put downward pressure on longerterm interest rates and
help make broader financial conditions more accommodative. To help support conditions in mortgage markets,
The Committee will now is maintaining its existing policies of reinvesting principal payments from its
holdings of agency debt and agency mortgagebacked securities in agency mortgagebacked securities. In
addition the Committee will maintain its existing policy and of rolling over maturing Treasury securities at auction.
The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust
those holdings as appropriate.
4. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently
anticipates that economic conditionsincluding low rates of resource utilization and a subdued outlook for inflation
over the medium runare likely to warrant exceptionally low levels for the federal funds rate at least through mid
2013.
5. The Committee discussed the range of policy tools available will continue to assess the economic outlook in
light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic
recovery in a context of price stability.
Note: If policymakers decide it is appropriate to reduce the remuneration rate on reserve balances, the
Board of Governors would issue an accompanying statement that might read:
In a related action, the Board of Governors voted today to reduce the interest rate paid on required and
excess reserve balances from 25 basis points to 10 basis points effective with the reserve maintenance
period that begins on November 17, 2011.
November FOMC StatementAlternative B
1. Information received since the Federal Open Market Committee met in August September indicates that
economic growth remains slow strengthened somewhat in the third quarter, reflecting in part a reversal of
the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point
to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated.
Household spending has been increaseding at only a modest a somewhat faster pace in recent months despite
some recovery in sales of motor vehicles as supply chain disruptions have eased. However, Business investment
in equipment and software has continueds to expand, but investment in nonresidential structures is still weak,
and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices
of energy and some commodities have declined from their peaks. Longerterm inflation expectations have
remained stable.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.
The Committee continues to expect some pickup in the a moderate pace of recovery economic growth over
coming quarters but and consequently anticipates that the unemployment rate will decline only gradually toward
levels that the Committee judges to be consistent with its dual mandate. Moreover, there are { [ significant ] }
downside risks to the economic outlook remain, including strains in global financial markets. The Committee also
anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the
Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further.
However, the Committee will continue to pay close attention to the evolution of inflation and inflation
expectations.
3. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent
with the dual mandate, the Committee decided today to continue its program to extend the average maturity of
its holdings of securities as announced in September. The Committee intends to purchase, by the end of June
2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal
amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward
pressure on longerterm interest rates and help make broader financial conditions more accommodative. To help
support conditions in mortgage markets, The Committee will now is maintaining its existing policies of
reinvesting principal payments from its holdings of agency debt and agency mortgagebacked securities in agency
mortgagebacked securities. In addition the Committee will maintain its existing policy and of rolling over
maturing Treasury securities at auction. The Committee will regularly review the size and composition of its
securities holdings and is prepared to adjust those holdings as appropriate.
4. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent and currently
anticipates that economic conditionsincluding low rates of resource utilization and a subdued outlook for inflation
over the medium runare likely to warrant exceptionally low levels for the federal funds rate at least [ through
mid2013 | for the next six to seven quarters ].
5. The Committee discussed the range of policy tools available will continue to assess the economic outlook in
light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a
context of price stability.
November FOMC StatementAlternative C
1. Information received since the Federal Open Market Committee met in August September indicates that
economic growth remains slow of late has been somewhat stronger than the Committee had expected.
Recent indicators point to continuing weakness in overall labor market conditions, and Although the
unemployment rate remains elevated, household spending has been increaseding at only a modest a faster pace
in recent months despite some recovery in sales of motor vehicles as supply chain disruptions have eased.
However, Business investment in equipment and software continues to expand, and investment in nonresidential
structures is still weak has increased. and The housing sector remains depressed. Inflation appears to have
moderated only somewhat since earlier in the year, despite a decline in the as prices of energy and some
commodities have declined from their peaks. Longerterm inflation expectations have remained stable.
2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.
The Committee continues to expect some pickup in the a moderate pace of recovery growth over coming
quarters but and anticipates that the unemployment rate will decline only gradually toward levels that the
Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the
economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will
settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the
effects of past energy and other commodity price increases dissipate further. However, the Committee will
continue to pay close attention to the evolution of inflation and inflation expectations.
3. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent
with the dual mandate In light of the recent improvement in the economic outlook, the Committee decided
today to reduce by half the size of the program to extend the average maturity of its holdings of securities that
it announced in September. The Committee intends to purchase, by the end of June 2012, $400 billion of
Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury
securities with remaining maturities of 3 years or less. This program should put downward pressure on longer
term interest rates and help make broader financial conditions more accommodative. In particular, the
Committee intends to limit purchases and sales of securities under this program to $200 billion each
and to complete these operations by the end of March 2012. To help support conditions in mortgage
markets, The Committee will now is maintaining its existing policies of reinvesting principal payments from
its holdings of agency debt and agency mortgagebacked securities in agency mortgagebacked securities. In
addition the Committee will maintain its existing policy and of rolling over maturing Treasury securities at auction.
The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust
those holdings as appropriate.
4. The Committee also decided to keep the target range for the federal funds rate at 0 to ¼ percent and
currently, now anticipates that economic conditionsincluding low rates of resource utilization and a subdued
outlook for inflation over the medium runare likely to warrant exceptionally low levels for the federal funds rate at
least [ through 2012 mid2013 | for the next four quarters ].
5. The Committee discussed the range of policy tools available to promote a stronger economic recovery in the
context of price stability. It will continue to assess the economic outlook in light of incoming information and is
prepared to employ its tools as appropriate to promote its objectives of maximum employment and stable
prices.
September 2011 FOMC Directive
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and
promote sustainable growth in output. To further its longrun objectives, the Committee seeks conditions in reserve
markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to
purchase, by the end of June 2012, Treasury securities with remaining maturities of approximately 6 years to 30
years with a total face value of $400 billion, and to sell Treasury securities with remaining maturities of 3 years or
less with a total face value of $400 billion. The Committee also directs the Desk to maintain its existing policy of
rolling over maturing Treasury securities into new issues and to reinvest principal payments on all agency debt and
agency mortgagebacked securities in the System Open Market Account in agency mortgagebacked securities in
order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs
the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency
MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee
informed of ongoing developments regarding the System's balance sheet that could affect the attainment over
time of the Committee's objectives of maximum employment and price stability.
[Note: In the November 2011 FOMC Directive Alternatives, emphasis (strikethrough) indicates strikethrough text
in the original document, and strong emphasis (bold) indicates bold red underlined text in the original document.]
November 2011 FOMC Directive Alternative A1
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and
promote sustainable growth in output. To further its longrun objectives, the Committee seeks conditions in reserve
markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to
continue the maturity extension program it began in September to purchase, by the end of June 2012,
Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400
billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400
billion. The Committee also directs the Desk to maintain its existing policyies of rolling over maturing Treasury
securities into new issues and to of reinvesting principal payments on all agency debt and agency mortgage
backed securities in the System Open Market Account in agency mortgagebacked securities in order to maintain
the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to
engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS
transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of
ongoing developments regarding the System's balance sheet that could affect the attainment over time of the
Committee's objectives of maximum employment and price stability.
November 2011 FOMC Directive Alternative A2
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and
promote sustainable growth in output. To further its longrun objectives, the Committee seeks conditions in reserve
markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to
continue the maturity extension program it began in September to purchase, by the end of June 2012,
Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400
billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400
billion. The Committee also directs the Desk to execute purchases of longerterm Treasury securities in
order to increase the total face value of domestic securities held in the System Open Market Account to
approximately $3.3 trillion by the end of September 2012. The Committee also directs the Desk to maintain
its existing policyies of rolling over maturing Treasury securities into new issues and to of reinvesting principal
payments on all agency debt and agency mortgagebacked securities in the System Open Market Account in
agency mortgagebacked securities in order to maintain the total face value of domestic securities at
approximately $2.6 trillion. The Committee directs the Desk to engage in dollar roll transactions as necessary to
facilitate settlement of the Federal Reserve's agency MBS transactions. The System Open Market Account
Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's
balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment
and price stability.
OR
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and
promote sustainable growth in output. To further its longrun objectives, the Committee seeks conditions in reserve
markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to
continue the maturity extension program it began in September to purchase, by the end of June 2012,
Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400
billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400
billion. The Committee also directs the Desk to execute purchases of longerterm Treasury securities and
of agency mortgagebacked securities of approximately equal face amounts in order to increase the total
face value of domestic securities held in the System Open Market Account to approximately $3.3 trillion
by the end of June 2012. The Committee also directs the Desk to maintain its existing policyies of rolling over
maturing Treasury securities into new issues and to of reinvesting principal payments on all agency debt and
agency mortgagebacked securities in the System Open Market Account in agency mortgagebacked securities in
order to maintain the total face value of domestic securities at approximately $2.6 trillion. The Committee directs
the Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency
MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee
informed of ongoing developments regarding the System's balance sheet that could affect the attainment over
time of the Committee's objectives of maximum employment and price stability.
November 2011 FOMC Directive Alternative B
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and
promote sustainable growth in output. To further its longrun objectives, the Committee seeks conditions in reserve
markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to
continue the maturity extension program it began in September to purchase, by the end of June 2012,
Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of $400
billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value of $400
billion. The Committee also directs the Desk to maintain its existing policyies of rolling over maturing Treasury
securities into new issues and to of reinvesting principal payments on all agency debt and agency mortgage
backed securities in the System Open Market Account in agency mortgagebacked securities in order to maintain
the total face value of domestic securities at approximately $2.6 trillion. The Committee directs the Desk to
engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS
transactions. The System Open Market Account Manager and the Secretary will keep the Committee informed of
ongoing developments regarding the System's balance sheet that could affect the attainment over time of the
Committee's objectives of maximum employment and price stability.
November 2011 FOMC Directive Alternative C
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and
promote sustainable growth in output. To further its longrun objectives, the Committee seeks conditions in reserve
markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to
modify the maturity extension program it began in September so as to purchase, by the end of MarchJune
2012, Treasury securities with remaining maturities of approximately 6 years to 30 years with a total face value of
$200$400 billion, and to sell Treasury securities with remaining maturities of 3 years or less with a total face value
of $200$400 billion. The Committee also directs the Desk to maintain its existing policyies of rolling over maturing
Treasury securities into new issues and to of reinvesting principal payments on all agency debt and agency
mortgagebacked securities in the System Open Market Account in agency mortgagebacked securities in order to
maintain the total face value of domestic securities at approximately $2.4$2.6 trillion. The Committee directs the
Desk to engage in dollar roll transactions as necessary to facilitate settlement of the Federal Reserve's agency
MBS transactions. The System Open Market Account Manager and the Secretary will keep the Committee
informed of ongoing developments regarding the System's balance sheet that could affect the attainment over
time of the Committee's objectives of maximum employment and price stability.
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