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Accessible Version Meeting of the Federal Open Market Committee November 3-4, 2009 Presentation Materials Presentation Materials (PDF) Pages 177 to 201 of the Transcript Appendix 1: Materials used by Mr. Sack Material for FOMC Presentation: Financial Market Developments and Desk Operations Brian Sack November 3, 2009 Class II FOMC - Restricted FR Exhibit 1 Top-left panel (1) Title: US Equity Prices (S&P 500) Series: Standard & Poor's 500 Index Horizon: August 1, 2008 - October 30, 2009 Description: S&P 500 declines in the intermeeting period. September 23: FOMC Source: Bloomberg Top-right panel (2) Title: Proportion of S&P 500 Companies Exceeding Consensus Earnings Estimates Series: Percent positive surprise, average percent positive surprise computed since 1991 Horizon: Q3 1995 - Q3 2009 (as of November 2, 2009) Description: Proportion of S&P 500 companies exceeding earnings estimates increases in the third quarter. Average computed since 1991 is approximately 70%. Source: Reuters, Bloomberg Middle-left panel (3) Title: GDP Forecasts Series: Primary dealer Gross Domestic Product forecasts before September 2009 and November 2009 FOMC meetings Horizon: 2009 - 2011 Description: Dealer survey shows little change in GDP forecasts from September to November. Source: Dealer Policy Survey Middle-right panel (4) Title: US Equity Indices for Financial Firms Series: Large Bank Index and Regional Bank Index Horizon: August 1, 2008 - October 30, 2009 Description: Large and regional bank indices decline. Source: Bloomberg Bottom-left panel (5) Title: Corporate Debt Spreads Series: High yield and investment grade corporate debt spreads Horizon: August 1, 2008 - October 30, 2009 Description: Corporate debt spreads continue to narrow. Source: Bank of America Bottom-right panel (6) Title: Equity Premium Series: Board of Governors equity premium Horizon: January 1, 1995 - October 30, 2009 Description: Equity premium declines. Source: Federal Reserve Board of Governors Exhibit 2 Top-left panel (7) Title: Treasury Yields Series: Yields for the 2-year, 5-year, and 10-year Treasury note Horizon: August 1, 2008 - October 30, 2009 Description: Treasury yields are mostly unchanged. Source: Bloomberg Top-right panel (8) Title: Speeches by FOMC Participants per Month Series: Speeches by FOMC participants per month Horizon: October 2006 - October 2009 Description: Speeches by FOMC participants were historically high in October 2009. Source: Bloomberg Middle-left panel (9) Title: Implied Federal Funds Rate Series: Federal funds rates implied by Eurodollar and federal funds futures contracts Horizon: 9/23/09, 10/30/09 Description: Implied federal funds rate declines slightly since September. Source: Federal Reserve Board of Governors Middle-right panel (10) Title: US Trade-Weighted Broad Dollar Index Series: US trade-weighted broad dollar index Horizon: August 1, 2003 - October 31, 2009 Description: US dollar index declines. Source: Federal Reserve Board of Governors Bottom-left panel (11) Title: Risk Reversal Pricing for Euro-Dollar Exchange Rate* Series: Euro-dollar 1-month 25-delta risk reversal Horizon: August 1, 2008 - October 31, 2009 Description: Demand for protection against US dollar depreciation declines. * Difference in implied volatilities on out-of-money calls and puts for 1-month 25-delta options Return to text Source: UBS Bottom-right panel (12) Title: Breakeven Inflation Rates Series: 5-year spot breakeven inflation rate and 5-year, 5-year forward breakeven inflation rate for inflationprotected Treasury securities Horizon: August 1, 2007 - October 31, 2009 Description: Breakeven inflation rates increase. Source: Barclays Capital Exhibit 3 Top-left panel (13) Title: Weekly Pace of Treasury Purchases Series: Weekly pace of Federal Reserve purchases of Treasury securities Horizon: March 27, 2009 - October 30, 2009 Description: Weekly pace of Treasury purchases generally continued to slow since the last FOMC meeting, to about $2 billion. Federal Reserve purchases of Treasury securities totaled $300 billion at the program's third quarter 2009 end. Source: Federal Reserve Bank of New York Top-right panel (14) Title: Distribution of Treasury Purchases Series: Federal Reserve purchases of Treasury securities by maturity Horizon: Through October 30, 2009 Description: Purchases concentrated in the two- to ten-year sector. Source: Federal Reserve Bank of New York Middle-left panel (15) Title: Dispersion of Treasury Yields (Fitting Error of Nominal Yield Curve) Series: Average absolute price errors for Treasury securities with two- to ten-year maturities Horizon: April 1, 2008 - October 28, 2009 Description: Dispersion across Treasury yields has decreased from its highs. Source: Federal Reserve Bank of New York Middle-right panel (16) Title: Average Ask-Side Quote Sizes Series: Market quote sizes for 2-year, 5-year, and 10-year Treasury securities Horizon: February 2008 - October 2009 Description: Depth of market quotes continues to rise. Source: BrokerTec Bottom-left panel (17) Title: 10-Year Treasury Yield Series: Actual 10-year yield and counterfactual regression model of 10-year yield Horizon: April 1990 - August 2009 Description: Actual yields remain below counterfactual yields predicted by regression model. Source: Federal Reserve Bank of New York Bottom-right panel (18) Title: Effects of Large-Scale Asset Purchase Announcements on Rates Series: Announcement effects seen in Treasury 2-year note yield, Treasury 10-year note yield, agency debt 10year yield, and agency MBS rate Description: Announcement effects seen in yields and rates. Effects range from approximately -10 to -135 basis points. Source: Federal Reserve Bank of New York Exhibit 4 Top-left panel (19) Title: Weekly Pace of Agency MBS Purchases Series: Monthly average of agency MBS purchases and potential path of weekly agency MBS purchases Horizon: December 2008 - March 2010 Description: Agency MBS purchases tapered. Source: Federal Reserve Bank of New York Top-right panel (20) Title: Weekly Pace of Agency Debt Purchases Series: Monthly average of agency MBS debt and potential path of weekly agency debt purchases Horizon: December 2008 - March 2010 Description: Agency debt purchases tapered. Source: Federal Reserve Bank of New York Middle-left panel (21) Title: Fixed-Rate Mortgage Spreads Series: Fannie Mae current coupon spread to Treasury, Fannie Mae current coupon spread to swap Horizon: August 1, 2000 - October 30, 2009 Description: Agency MBS spreads narrow. Source: Barclays Capital Middle-right panel (22) Title: Agency Debt Spread Series: Fannie Mae 5-year benchmark spread to Treasury Horizon: August 1, 2000 - October 30, 2009 Description: Agency debt spread narrows. Source: Bloomberg Bottom-left panel (23) Title: Swaption Implied Volatility Series: 3-month forward 10-year swaption implied volatility Horizon: August 1, 2002 - October 30, 2009 Description: Swaption volatility decreasing but remains elevated. Source: Barclays Capital Bottom-right panel (24) Title: Concentration of Settled MBS Holdings by Coupon Series: Current and projected settled MBS Federal Reserve holdings by coupon Description: Concentration of MBS holdings will shift by the end of the program. Current concentration of purchases has been mainly in coupons of 4.5 percent. Projected concentration will increase the volume of coupons at 5 and 5.5 percent. Source: Federal Reserve Bank of New York Exhibit 5 Top-left panel (25) Title: Balance Sheet Assets by Category Series: Federal Reserve balance sheet assets categorized by All Other, Lending to Systemically Important Institutions, Short-Term Liquidity Facilities, and Outright Asset Holdings Horizon: August 1, 2008 - October 30, 2009 Description: Balance sheet composition shifts as securities purchases outpace decline in liquidity facilities. Source: Federal Reserve Bank of New York Top-right panel (26) Title: Probability of Using Exit Tools Series: Primary dealer mean and range of expectations for using reverse repurchase agreements, term deposits, and asset sales Description: Primary dealers expect Federal Reserve use of reverse repurchase agreements and term deposits but disagree about likelihood of asset sales. Source: Dealer Policy Survey Middle-left panel (27) Title: Federal Reserve Short-Term Liquidity Facilities Series: Outstanding amounts for Federal Reserve Term Securities Lending Facility, Primary Credit Facility, Primary Dealer Credit Facility, Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, Commercial Paper Funding Facility, Central Bank Liquidity Swaps, and Term Auction Facility Horizon: August 1, 2008 - September 18, 2009 Description: Usage of Federal Reserve liquidity facilities decreases. Source: Federal Reserve Bank of New York Middle-right panel (28) Remaining Usage of Liquidity Facilities FX Liquidity Swaps1 CPFF TAF Volume of Funding Outstanding ($ bil) 33 15 110 Number of Current Borrowers/Issuers 4 13 177 -9 -10 -19 Change in Number of Borrowers/Issuers2 1 Number of FX liquidity swap borrowers includes ECB participants only. Return to table 2 Change since previous FOMC meeting. Return to table Source: Federal Reserve Bank of New York Bottom-left panel (29) Title: Annualized Year-End Premium on 2-Month LIBOR Series: Annualized year-end premium on 2-month LIBOR Horizon: Q1 2001 - Q4 2009 Description: Relatively minimal upward pressure on LIBOR rate approaching year-end. Source: Federal Reserve Bank of New York Bottom-right panel (30) Title: Treasury Bill Forward Rates Across Year-End Series: 1-week implied forward Treasury bill rates spanning year-end Horizon: 2006 - 2009 Description: Implied forward rate for the week spanning year-end low. Source: Bloomberg Appendix 2: Materials used by Mr. Madigan Material for Briefing on FOMC Participants' Economic Projections Brian Madigan November 3, 2009 Class I FOMC - Restricted Controlled (FR) Exhibit 1. Central tendencies and ranges of economic projections, 2009-12 and over the longer run Actual values for years 2004 through 2008. Change in real GDP Percent 2004 2005 2006 2007 2008 2009 2010 2011 2012 Longer Run 3.1 2.7 2.4 2.5 -1.9 - - - - - Upper End of Range - - - - - 0.0 4.0 4.6 5.0 3.0 Upper End of Central Tendency - - - - - -0.1 3.5 4.5 4.8 2.8 Lower End of Central Tendency - - - - - -0.4 2.5 3.4 3.5 2.5 Lower End of Range - - - - - -0.5 2.0 2.5 2.8 2.4 2004 2005 2006 2007 2008 2009 2010 2011 2012 Longer Run 5.4 4.9 4.4 4.8 6.9 - - - - - Upper End of Range - - - - - 10.3 10.2 8.7 7.6 6.3 Upper End of Central Tendency - - - - - 10.1 9.7 8.6 7.5 5.2 Lower End of Central Tendency - - - - - 9.9 9.3 8.2 6.8 5.0 Lower End of Range - - - - - 9.8 8.6 7.2 6.1 4.8 Actual Unemployment rate Percent Actual PCE inflation Percent 2004 2005 2006 2007 2008 2009 2010 2011 2012 Longer Run 3.0 3.3 1.9 3.6 1.7 - - - - - Upper End of Range - - - - - 1.7 2.0 2.4 2.3 2.0 Upper End of Central Tendency - - - - - 1.2 1.6 1.9 1.9 2.0 Lower End of Central Tendency - - - - - 1.1 1.3 1.0 1.2 1.7 Lower End of Range - - - - - 1.0 1.1 0.6 0.2 1.5 Actual Core PCE inflation Percent 2004 2005 2006 2007 2008 2009 2010 2011 2012 2.2 2.3 2.3 2.5 2.0 - - - - Upper End of Range - - - - - 1.6 2.0 2.4 2.3 Upper End of Central Tendency - - - - - 1.5 1.5 1.6 1.7 Lower End of Central Tendency - - - - - 1.4 1.0 1.0 1.0 Lower End of Range - - - - - 1.3 0.9 0.5 0.2 Actual NOTE: Projections of change in real gross domestic product (GDP) and of inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation 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 June projections were made in conjunction with the FOMC meeting on June 23-24, 2009. The central tendency excludes the three highest and three lowest projections for each variable in each year. The range for a variable in a given year includes all participants' projections, from lowest to highest, for that variable in that year. Exhibit 2: Economic Projections for 2009 Real GDP Growth 2009 2009:H1 2009:H2 -0.4 to -0.1 -3.6 2.9 to 3.5 -1.5 to -1.0 -3.5 to -3.3 0.5 to 1.4 -0.5 to 0.0 -3.6 to -3.5 2.7 to 3.7 June projection -1.6 to -0.6 -4.0 to -3.0 0.1 to 2.9 Memo: Greenbook -0.3 -3.6 3.1 June Greenbook -1.1 -3.3 1.1 Central Tendency June projection Range Unemployment Rate 2009:Q4 Central Tendency June projection Range 9.9 to 10.1 9.8 to 10.1 9.8 to 10.3 June projection 9.7 to 10.5 Memo: Greenbook 10.1 June Greenbook 10.0 PCE Inflation 2009 2009:H1 2009:H2 1.1 to 1.2 -0.1 to 0.0 2.1 to 2.5 1.0 to 1.4 0.2 to 0.6 1.8 to 2.5 1.0 to 1.7 -0.1 to 0.1 2.0 to 3.4 June projection 1.0 to 1.8 -0.1 to 1.0 1.4 to 3.2 Memo: Greenbook 1.1 -0.1 2.4 June Greenbook 1.4 0.3 2.6 2009 2009:H1 2009:H2 1.4 to 1.5 1.6 1.2 to 1.4 1.3 to 1.6 1.8 to 2.0 0.7 to 1.4 1.3 to 1.6 1.5 to 1.6 1.0 to 1.6 June projection 1.2 to 2.0 1.5 to 2.0 0.5 to 2.0 Memo: Greenbook 1.4 1.6 1.3 June Greenbook 1.4 1.9 0.9 Central Tendency June projection Range Core PCE Inflation Central Tendency June projection Range NOTE: For real GDP growth and inflation, the values for 2009, 2009:H1, and 2009:H2 are at annual rates in percent, measured in terms of Q4/Q4, Q2/Q4, and Q4/Q2, respectively. Exhibit 3: Economic Projections for 2010-2012 and Longer Run Real GDP Growth 2010 2011 2012 Longer Run 2.5 to 3.5 3.4 to 4.5 3.5 to 4.8 2.5 to 2.8 2.1 to 3.3 3.8 to 4.6 --- 2.5 to 2.7 2.0 to 4.0 2.5 to 4.6 2.8 to 5.0 2.4 to 3.0 June projection 0.8 to 4.0 2.3 to 5.0 --- 2.4 to 2.8 Memo: Greenbook 3.4 4.4 5.0 2.5 June Greenbook 3.0 4.8 5.3 2.5 2010 2011 2012 Longer Run 9.3 to 9.7 8.2 to 8.6 6.8 to 7.5 5.0 to 5.2 9.5 to 9.8 8.4 to 8.8 --- 4.8 to 5.0 8.6 to 10.2 7.2 to 8.7 6.1 to 7.6 4.8 to 6.3 June projection 8.5 to 10.6 6.8 to 9.2 --- 4.5 to 6.0 Memo: Greenbook 9.5 8.2 6.1 4.8 June Greenbook 9.7 8.0 --- 4.8 2010 2011 2012 Longer Run 1.3 to 1.6 1.0 to 1.9 1.2 to 1.9 1.7 to 2.0 1.2 to 1.8 1.1 to 2.0 --- 1.7 to 2.0 Central Tendency June projection Range Unemployment Rate Central Tendency June projection Range PCE Inflation Central Tendency June projection 2010 2011 2012 Longer Run 1.1 to 2.0 0.6 to 2.4 0.2 to 2.3 1.5 to 2.0 June projection 0.9 to 2.0 0.5 to 2.5 --- 1.5 to 2.1 Memo: Greenbook 1.4 1.0 1.2 2.0 June Greenbook 1.1 1.2 --- 2.0 Range Core PCE Inflation 2010 2011 2012 1.0 to 1.5 1.0 to 1.6 1.0 to 1.7 1.0 to 1.5 0.9 to 1.7 --- 0.9 to 2.0 0.5 to 2.4 0.2 to 2.3 June projection 0.5 to 2.0 0.2 to 2.5 --- Memo: Greenbook 1.1 1 1.1 June Greenbook 0.8 0.7 --- Central Tendency June projection Range NOTE: See Exhibit 1 for variable definitions. Exhibit 4. Risks and Uncertainty in Economic Projections Top-left panel Uncertainty about GDP Growth Number of participants Lower Similar Higher November projections 0 1 16 June projections 0 1 16 Top-right panel Risks to GDP Growth Number of participants Downside Balanced Upside November projections 1 16 0 June projections 7 10 0 Bottom-left panel Uncertainty about PCE Inflation Number of participants Lower Similar Higher November projections 1 2 14 June projections 1 2 14 Bottom-right panel Risks to PCE Inflation Number of participants Downside Balanced Upside November projections 2 13 2 June projections 2 14 1 Appendix 3: Materials used by Mr. Madigan Material for Briefing on Monetary Policy Alternatives Brian Madigan November 4, 2009 Class I FOMC - Restricted Controlled (FR) September FOMC Statement Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time. In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010. As previously announced, the Federal Reserve's purchases of $300 billion of Treasury securities will be completed by the end of October 2009. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted. [Note: In the November FOMC Statement Alternatives, strong emphasis (bold) indicates bold red underlined text in the original document, and emphasis (italic) indicates bold blue underlined text in the original document.] November FOMC Statement - Alternative A Information received since the Federal Open Market Committee met inSeptember suggests that economic activity has turned up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Business spending is being damped by firms' efforts to reduce inventories to bring them into better alignment with sales and by cutbacks in fixed investment. Partly reflecting these factors, the Committee anticipates that the economic recovery will be relatively weak and that slack in resource utilization will diminish quite slowly absent further policy action. Inflation has fallen considerably over the past year. With substantial resource slack likely to continue to dampen cost pressures and with longerterm inflation expectations stable, the Committee expects that inflation will remain subdued for some time. To promote a sustained economic recovery and higher resource utilization, the Committee will provide additional monetary stimulus by increasing its purchases of agency mortgage-backed securities to a total of $1.5 trillion, up from the previously announced amount of $1.25 trillion, and it is also in the process of purchasing up to $200 billion of agency debt. The Committee will extend these purchases through the second quarter of 2010 and gradually slow their pace in order to promote a smooth transition in markets. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities, in light of the evolving economic outlook and conditions in financial markets. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that low rates of resource utilization, subdued inflation, and stable inflation expectations are likely to warrant this exceptionally low range for the federal funds rate for an extended period. The Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted. November FOMC Statement - Alternative B Information received since the Federal Open Market Committee met inSeptember suggests that economic activity has continued to pick up. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability. With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time. In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt.The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted. November FOMC Statement - Alternative C Information received since the Federal Open Market Committee met inSeptember indicates that a recovery in economic activity is under way. Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding. Businesseshave made additional progress in bringing inventory stocks into better alignment with sales. The Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth in a context of price stability. Longer-term inflation expectations have been stable, and the Committee expects that, with appropriate monetary policy adjustments, inflation will remain at levels consistent with price stability. At this meeting, the Committee maintained the target range for the federal funds rate at its exceptionally low level of 0 to ¼ percent, and it anticipates that economic conditions are likely to warrant low levels of the federal funds rate for some time. In view of continued improvements in financial market conditions and the economic outlook, the Committee decided to cap its purchases of agency mortgage-backed securities at $1.1 trillion and its purchases of agency debt at $160 billion. The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end ofJanuary 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted. Possible Sequence of Forward Guidance and Policy Actions -- Revised [Note: In the "Possible Sequence of Forward Guidance and Policy Actions -- Revised", emphasis (italics) indicates underlined text in the original document.] Language from the September 2009 statement In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds ratefor an extended period. Language from the November 2009 statement Alternative A. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that low rates of resource utilization, subdued inflation, and stable inflation expectations are likely to warrant this exceptionally low rangefor the federal funds rate for an extended period. The Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. Alternative B. In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. Alternative C. At this meeting, the Committee maintained the target range for the federal funds rate at its exceptionally low level of 0 to ¼ percent, and it anticipates that economic conditions are likely to warrant low levels of the federal funds rate for some time. Economic recovery is sufficiently established In these circumstances, the Committee will maintain the target range for the federal funds rate at 0 to ¼ percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant [exceptionally] low levels of the federal funds rate for some time. Policy firming is likely soon In these circumstances, the Committee maintained its target range for the federal funds rate at 0 to ¼ percent at this meeting. With the economic recovery now reasonably well established, [resource utilization increasing,] and inflation stable, the Committee anticipates that [some | a gradual] reduction in the exceptionally large degree of monetary accommodation will be appropriate before long. The timing [and pace] of this reduction will depend on the evolution of economic and financial conditions, [but at present it appears likely that the Committee could [begin to] implement some [a] reduction in accommodation in the [first | second] half of 20xx]. The reduction in accommodation will likely be accomplished in part through an increase in the interest rate paid on reserve balances held by depository institutions at the Federal Reserve; that increase will have the effect of putting upward pressure on the federal funds rate and other money market rates. In order to reinforce the upward pressure on short-term interest rates, the Federal Reserve may [likely will] also employ tools to drain reserves from the banking system, such as conducting reverse repurchase agreements and offering term deposits to depository institutions. [In order to ensure the readiness of such tools, the Federal Reserve plans to conduct some small-scale operations of the facilities over the next few months.] Although the Federal Reserve does not currently have plans to sell assets from its portfolio, it retains the option of asset sales as a means of further reducing monetary accommodation. Policy firming is commencing In these circumstances, the Committee increased its target range for the federal funds rate to ¼ to ½ percent. In association with this increase, the Board of Governors increased the rate of interest on bank reserves to ½ percent and approved requests from Federal Reserve Banks to raise the discount rate to [1] percent, and the Committee directed the Federal Reserve Bank of New York to use reverse repurchase agreements to lower the quantity of excess reserves in the banking system, consistent with the higher target range for the federal funds rate. With the economic recovery now well established, resource utilization continuing to increase, and inflation stable, the Committee anticipates that it will [further] [gradually] reduce the still-exceptional degree of monetary accommodation in coming months. This reduction is likely to be accomplished by additional increases in the interest rate on bank reserves, by further use of reverse repurchase agreements (possibly with a broader set of counterparties than just primary dealers), and potentially by offering term deposits to depository institutions. Although the Federal Reserve does not currently have plans to sell assets from its portfolio, it retains the option of asset sales as a means of further reducing monetary accommodation. DIRECTIVES September FOMC Meeting The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to purchase agency debt, agency MBS, and longer-term Treasury securities during the intermeeting period with the aim of providing support to private credit markets and economic activity. The timing and pace of these purchases should depend on conditions in the markets for such securities and on a broader assessment of private credit market conditions. The Desk is expected to complete purchases of about $300 billion of longer-term Treasury securities by the end of October. It is also expected to execute purchases of up to $200 billion in housing-related agency debt and about $1.25 trillion of agency MBS by the end of the first quarter of 2010. The Desk is expected to gradually slow the pace of these purchases as they near completion. The Committee anticipates that outright purchases of securities will cause the size of the Federal Reserve's balance sheet to expand significantly in coming months. 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 FOMC Meeting -- Alternative A The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to purchase agency debt and agency MBS during the intermeeting period with the aim of providing support to private credit markets and economic activity. The timing and pace of these purchases should depend on conditions in the markets for such securities and on a broader assessment of private credit market conditions. The Desk is expected to execute purchases of up to $200 billion in housing-related agency debt and about $1.5 trillion of agency MBS by the end of the second quarter of 2010. The Desk is expected to gradually slow the pace of these purchases as they near completion. The Committee anticipates that outright purchases of securities will cause the size of the Federal Reserve's balance sheet to expand significantly in coming months. 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 FOMC Meeting -- Alternative B The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to purchase agency debt and agency MBS during the intermeeting period with the aim of providing support to private credit markets and economic activity. The timing and pace of these purchases should depend on conditions in the markets for such securities and on a broader assessment of private credit market conditions. The Desk is expected to execute purchases of about $175 billion in housing-related agency debt and about $1.25 trillion of agency MBS by the end of the first quarter of 2010. The Desk is expected to gradually slow the pace of these purchases as they near completion. The Committee anticipates that outright purchases of securities will cause the size of the Federal Reserve's balance sheet to expand significantly in coming months. 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 FOMC Meeting -- Alternative C The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output. To further its long-run objectives, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to purchase agency debt and agency MBS during the intermeeting period with the aim of providing support to private credit markets and economic activity. The timing and pace of these purchases should depend on conditions in the markets for such securities and on a broader assessment of private credit market conditions. The Desk is expected to execute purchases of about $160 billion in housing-related agency debt and about $1.1 trillion of agency MBS by the end of January 2010. The Desk is expected to gradually slow the pace of these purchases as they near completion. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. Return to top Home | Monetary policy | FOMC | FOMC transcripts Accessibility | Contact Us Last update: March 4, 2015
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