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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.
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