The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
October 30-31, 2007 Authorized for Public Release Appendix 1: Materials used by Mr. Dudley 143 of 162 October 30-31, 2007 Authorized for Public Release 144 of 162 Class II FOMC – Restricted FR Page 1 of 10 (1) Lower Rated ABX Tranches Keep Falling January 1, 2007 – October 26, 2007 Price 120 Price 120 AAA 100 100 AA 80 80 BBB 60 60 A AB X P rices fo r 07-01 T ranches 40 40 BBB- 20 20 S&P R atings D o wngrade: 10/ 17 and 10/ 19 0 01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 0 10/01/07 Source: JP Morgan (2) Outstanding ABCP Volume Contraction Slows January 1, 2007 – October 24, 2007 $ Billions 1200 Percent 6.50 Total Outstanding Volume (LHS) Average 30-Day Rate (RHS) Average Overnight Rate (RHS) 1150 1100 F OM C R ate C ut: 9/ 18 6.25 6.00 1050 5.75 1000 5.50 950 5.25 900 5.00 850 4.75 800 4.50 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Aug-07 Sep-07 Oct-07 Source: Federal Reserve Board (3) Secured CP Rate Spreads Narrow January 1, 2007 – October 26, 2007 BPS 160 140 120 100 80 60 40 20 0 -20 BPS 160 140 120 100 80 60 40 20 0 -20 Secured CP - Unsecured CP Secured CP - One Month OIS 01/01/07 02/01/07 03/01/07 04/01/07 Source: Federal Reserve Board 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 October 30-31, 2007 Authorized for Public Release 145 of 162 Class II FOMC – Restricted FR Page 2 of 10 (4) High Yield Issuance Recovering January 2007 – October 2007 $ Billions 35 Investment Grade 30 High-Yield 25 20 15 10 5 0 1/5 1/26 2/16 3/9 3/30 4/20 Source: Bloomberg 5/11 6/1 6/22 Week Ending 7/13 8/3 8/24 9/14 10/5 10/26 (5) CLO Issuance Picks Up, While CDO Issuance Remains Depressed January 2006 – October 2007 $ Billions 60 CLO 50 CDO 40 30 20 10 0 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 7.25 Mar-07 May-07 Jul-07 Sep-07 *Data for October 2007 includes issuance until 10/22/2007 Source: Merrill Lynch Percent Jan-07 (6) Spread between Jumbo and Conforming Mortgage Rates Has Narrowed Somewhat Percent January 1, 2007 – October 26, 2007 7.25 Jumbo Mortgage Rates 7.00 7.00 Conforming Mortgage Rates 6.75 6.75 6.50 6.50 6.25 6.25 6.00 6.00 F OM C R ate C ut: 9/ 18 5.75 5.75 5.50 5.50 01/01/07 02/01/07 03/01/07 Source: Bloomberg 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 October 30-31, 2007 Authorized for Public Release 146 of 162 Class II FOMC – Restricted FR Page 3 of 10 (7) Spreads between U.S. Term Funding Rates and OIS Rates Narrow July 1, 2007 – October 26, 2007 BPS 120 120 F OM C R ate C ut: 9/ 18 Spread between One-Month Libor and OIS rates 100 BPS 100 Spread between Three-Month Libor and OIS rates 80 80 60 60 40 40 20 20 0 0 07/01/07 07/15/07 07/29/07 08/12/07 08/26/07 09/09/07 09/23/07 10/07/07 10/21/07 Source: Bloomberg (8) Euro Term Funding Pressures Still Evident July 1, 2007 – October 26, 2007 BPS 100 BPS 100 Spread between One-Month Euribor and EONIA swap rates 80 80 Spread between Three-Month Euribor and EONIA swap rates 60 60 40 40 20 20 0 0 07/01/07 07/15/07 07/29/07 08/12/07 08/26/07 09/09/07 09/23/07 10/07/07 10/21/07 Source: Bloomberg (9) CDS Spreads on Financials - A Bumpy Ride June 1, 2007 – October 26, 2007 BPS 700 BPS F OM C R ate C ut: 9/ 18 Mortgage Insurers (LHS) 140 600 Financial Guarantors (LHS) 120 500 Large Commercial Banks (RHS) 100 Broker Dealers (RHS) 400 80 300 60 200 40 100 20 0 0 06/01/07 Source: Markit 07/01/07 08/01/07 09/01/07 10/01/07 October 30-31, 2007 Authorized for Public Release 147 of 162 Class II FOMC – Restricted FR Page 4 of 10 (10) Global Credit Default Swap Spreads March 1, 2007 – October 26, 2007 BPS 600 600 F OM C R ate C ut: 9/ 18 ITRAXX Crossover Series 7 500 BPS 500 LCDX 400 400 300 300 200 200 100 100 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 Source: Bloomberg (11) U.S. Equity Indices Reverse Sharp Decline January 1, 2007 – October 26, 2007 Index to 100 on 1/1 120 120 F OM C R ate C ut: 9/ 18 S&P 500 Nasdaq Russell 2000 115 Index to 100 on 1/1 115 110 110 105 105 100 100 95 95 01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 Source: Bloomberg (12) Equity Earnings Expectations January 1, 2007 – October 19, 2007 Percent 13 12 11 10 9 8 7 6 5 Percent 13 12 11 10 9 8 7 6 5 S&P 500: Bottom-Up Equity Analyst Forecasts for 2008 S&P 500: Bottom-Up Equity Analyst Forecasts for 2007 01/01/07 02/01/07 03/01/07 Source: Thompson Financial 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 October 30-31, 2007 Authorized for Public Release 148 of 162 Class II FOMC – Restricted FR Page 5 of 10 (13) Demand for Downside Protection on S&P 500 Has Fallen January 1, 2007 – October 25, 2007 Skew 0.16 Skew 0.16 0.14 0.14 0.12 0.12 0.10 0.10 Put - Call Equity Risk Reversal 0.08 0.08 0.06 0.06 0.04 0.04 0.02 0.02 0.00 0.00 01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 Source: OptionMetrics (14) Correlation of Daily Price/Yield Changes August 7, 2007 – September 17, 2007 Variables 2YR Yield 10YR Yield S&P USD/JPY Swap Spreads VIX CDX IG Merrill-HY 2YR Yield 10YR Yield S&P 0.89 0.75 0.80 -0.55 -0.62 0.62 -0.84 0.75 0.77 -0.35 -0.51 0.63 -0.78 0.71 -0.53 -0.81 0.71 -0.57 Source: Bloomberg and JP Morgan Swap USD/JPY Spreads -0.37 -0.64 0.48 -0.78 0.56 -0.58 0.54 VIX CDX IG -0.58 0.47 -0.56 Blue boxes denote correlations greater than 0.50 or less than -0.50 (15) Correlation of Daily Price/Yield Changes September 18, 2007 – October 26, 2007 Variables 2YR Yield 10YR Yield S&P USD/JPY Swap Spreads VIX CDX IG Merrill-HY 2YR Yield 10YR Yield S&P 0.77 0.22 0.18 0.37 -0.13 0.49 -0.67 0.28 0.05 0.27 -0.26 0.51 -0.70 0.62 -0.53 -0.91 0.78 -0.40 Source: Bloomberg and JP Morgan Swap USD/JPY Spreads -0.53 -0.52 0.58 -0.41 0.47 -0.37 0.08 VIX CDX IG -0.74 0.28 -0.65 Blue boxes denote correlations greater than 0.50 or less than -0.50 October 30-31, 2007 Authorized for Public Release 149 of 162 Class II FOMC – Restricted FR Page 6 of 10 (16) Oil Refining Crack Spread Near Lows January 1, 2005 – October 26, 2007 $ Price 35 $ Price 35 30 30 25 25 20 20 15 15 Average Spread Since Jan '05 10 10 5 5 0 0 01/01/05 05/01/05 09/01/05 01/01/06 05/01/06 09/01/06 01/01/07 05/01/07 09/01/07 Source: Bloomberg (17) Dollar Stays on Gradual Downtrend January 1, 2007 – October 26, 2007 110 108 106 104 102 100 98 96 94 92 Index to 100 Dollar Appreciation Index to 100 Broad Trade-Weighted Dollar: Index as of Jan97 Dollar Depreciation Yen vs. Dollar: Index as of Jan07 01/01/07 02/01/07 03/01/07 Euro vs. Dollar: Index as of Jan07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 110 108 106 104 102 100 98 96 94 92 10/01/07 Source: Bloomberg and Federal Reserve Board (18) Dollar Tracks Interest Rate Differentials January 1, 2007 – October 26, 2007 BPS 140 120 100 80 60 40 20 0 -20 $/Euro Eurodollar-Euribor (LHS) $/EUR (RHS) 01/01/07 02/01/07 03/01/07 Source: Bloomberg 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 1.28 1.30 1.32 1.34 1.36 1.38 1.40 1.42 1.44 October 30-31, 2007 Authorized for Public Release 150 of 162 Class II FOMC – Restricted FR Page 7 of 10 (19) Probabilities on Policy Rate Expectations for October FOMC Meeting September 18, 2007 – October 26, 2007 Percent 80 4.25 Target Rate 4.50 Target Rate 4.75 Target Rate 70 60 Sept. Housing Starts: 10/17 50 40 30 Sept. Nonfarm Payrolls: 10/5 20 10 0 9/18/2007 9/21/2007 9/26/2007 10/1/2007 10/4/2007 10/10/2007 10/15/2007 10/18/2007 10/23/2007 10/26/2007 Source: Cleveland Fed Percent 6.0 (20) Distribution of Expected Policy Target Among Primary Dealers Prior to October 31 FOMC Meeting 5.5 5.0 4.5 4.0 Survey Response -size indicates freq 3.5 May Average Forecast Market Rates as of 10/23 3.0 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Source: Dealer Policy Survey Percent 6.0 (21) Distribution of Expected Policy Target Among Primary Dealers Prior to September 18 FOMC Meeting 5.5 5.0 4.5 4.0 3.5 Survey Response -size indicates freq September Average Forecast Market Rates as of 9/10 3.0 Q4 2007 Source: Dealer Policy Survey Q1 2008 Q2 2008 Q3 2008 Q4 2008 October 30-31, 2007 Authorized for Public Release 151 of 162 Class II FOMC – Restricted FR Page 8 of 10 (22) TIPS Implied Inflation: 5-10 Year Horizon June 1, 2006 – October 26, 2007 Percent 3.00 Percent F OM C R ate C ut: 9/ 18 Barclays Federal Reserve Board 2.80 3.00 2.80 2.60 2.60 2.40 2.40 2.20 2.20 06/01/06 09/01/06 12/01/06 03/01/07 06/01/07 09/01/07 Source: Federal Reserve Board and Barclays Capital (23) While Day-to Day Effective Rate Remain Volatile, Cumulative Effective Rate at Target Percent September 18, 2007 – October 26, 2007 Percent 4.84 4.84 Rolling Cumulative Effective Rate Since 9/19 4.82 Target Fed Funds Rate 4.82 4.80 4.80 4.78 4.78 4.76 4.76 4.74 4.74 4.72 4.72 4.70 4.70 09/18/07 09/25/07 10/02/07 10/09/07 10/16/07 10/23/07 Source: Federal Reserve Bank of New York Percent 5.75 (24) Effective versus Target Fed Funds Rate July 1, 2006 – October 26, 2007 Effective Rate 5.50 Percent 5.75 Target Rate 5.50 5.25 5.25 5.00 5.00 4.75 4.75 4.50 4.50 4.25 4.25 07/01/07 08/01/07 Source: Federal Reserve Bank of New York 09/01/07 10/01/07 October 30-31, 2007 Authorized for Public Release Class II FOMC – Restricted FR Percent 152 of 162 Page 9 of 10 APPENDIX: Reference Exhibits Percent (25) Eurodollar Futures Curve Shifts Lower 5.25 5.25 8/7/2007 9/17/2007 10/26/2007 5.00 5.00 4.75 4.75 4.50 4.50 4.25 4.25 4.00 4.00 Dec-07 Mar-08 Source: Bloomberg Jun-08 Sep-08 Eurodollar Futures Contracts (26) Probability Distribution on Eurodollar Futures Contract 300 Days Forward Percent 20 Dec-08 Percent 20 10/26/2007 9/17/2007 16 16 12 12 8 8 4 4 0 0 1.75 2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75 5.00 5.25 5.50 5.75 6.00 6.25 6.50 Source: CME Option Percent 5.25 (27) Treasury Yield Curve Shifts Lower and Continues to Steepen 8/7/2007 5.00 9/17/2007 Percent 5.25 10/26/2007 5.00 4.75 4.75 4.50 4.50 4.25 4.25 4.00 4.00 3.75 3.75 3.50 1-Year 2-Year Source: Bloomberg 3-Year 5-Year Years to Maturity 7-Year 10-Year 3.50 October 30-31, 2007 Authorized for Public Release 153 of 162 Class II FOMC – Restricted FR Page 10 of 10 (28) Implied Volatility Increases in Recent Days January 1, 2007 – October 26, 2007 Percent 140 Percent VIX (RHS) 120 100 35 F OM C R ate C ut: 9/ 18 30 25 SMOVE (LHS) 80 20 60 15 1-Month Dollar-Yen Vol (RHS) 40 20 10 5 1-Month Euro-Dollar Vol (RHS) 0 0 01/01/07 02/01/07 03/01/07 04/01/07 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 Source: Bloomberg (29) US Corporate Option-Adjusted Debt Spread by Rating March 1, 2007 – October 26, 2007 BPS 500 B 400 BPS S&P R ating D o wngrades: 10/ 17 and 10/ 19 500 400 Ba 300 300 200 200 Baa A 100 Aaa Aa 0 03/01/07 04/01/07 Source: Bloomberg 100 F OM C R ate C ut: 9/ 18 0 05/01/07 06/01/07 07/01/07 08/01/07 09/01/07 10/01/07 October 30-31, 2007 Authorized for Public Release Appendix 2: Materials used by Mr. Madigan 154 of 162 October 30-31, 2007 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Material for FOMC Briefing on October Projections Brian Madigan October 30, 2007 155 of 162 October 30-31, 2007 Authorized for Public Release 156 of 162 Table 1: Economic Projections of Federal Reserve Governors and Reserve Bank Presidents 1 2007 2009 2010 2.2 to 2.3 1.8 to 2.5 2-1/4 to 2-1/2 2-1/2 to 2-3/4 2.3 to 2.7 2.5 to 2.6 4.7 to 4.8 4-1/2 to 4-3/4 4.8 to 5.0 about 4-3/4 4.8 to 5.0 4.7 to 4.9 PCE Inflation 2.9 to 3.0 1.8 to 2.1 1.7 to 2.0 1.6 to 1.9 Core PCE Inflation June projections 1.8 to 1.9 2 to 2-1/4 1.7 to 1.9 1-3/4 to 2 1.7 to 1.9 1.6 to 1.9 Real GDP Growth June projections 2.2 to 2.5 2 to 2-3/4 1.6 to 2.6 2-1/2 to 3 2.0 to 2.8 2.2 to 2.7 4.7 to 4.8 4-1/2 to 4-3/4 4.6 to 5.0 4-1/2 to 5 4.6 to 5.0 4.6 to 5.0 PCE Inflation 2.7 to 3.2 1.7 to 2.3 1.5 to 2.2 1.5 to 2.0 Core PCE Inflation June projections 1.8 to 2.1 2 to 2-1/4 1.7 to 2.0 1-3/4 to 2 1.5 to 2.0 1.5 to 2.0 Central Tendencies Real GDP Growth June projections Unemployment Rate June projections 2008 Ranges Unemployment Rate June projections 1. Projections of real GDP growth, PCE inflation and core PCE inflation are fourth-quarter-to-fourthquarter growth rates, i.e. percentage changes from the fourth quarter of the prior year to the fourth quarter of the indicated year. PCE inflation and core PCE inflation are the percentage rates of change in the price index for personal consumption expenditures and the price index for personal consumption expenditures excluding food and energy, respectively. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of each year. Each participant's projections are based on his or her assessment of appropriate monetary policy. The range for each variable in a given year includes all participants' projections, from lowest to highest, for that variable in the given year; the central tendencies exclude the three highest and three lowest projections for each variable in each year. October 30-31, 2007 Authorized for Public Release Appendix 3: Materials used by Mr. Stockton 157 of 162 October 30-31, 2007 Authorized for Public Release 158 of 162 Gross Domestic Product (percent change at an annual rate) 2007-Q2 Final Real GDP 2007-Q3 Greenbook Advance 3.8 3.3 3.9 3.6 3.6 3.5 Personal Consumption Durables Nondurables Services 1.4 1.7 -0.5 2.3 3.2 2.8 2.9 3.4 3.0 4.4 2.7 2.9 Business Fixed Investment Nonresidential Structures Equipment and Software 11.0 26.2 4.7 6.2 3.7 7.4 7.9 12.3 5.9 -11.8 -22.4 -20.1 Government Federal State and Local 4.1 6.0 3.0 3.2 5.8 1.8 3.7 6.8 2.0 Exports 7.5 16.9 16.2 Imports -2.7 3.5 5.2 Change in nonfarm business inventories 1.3 -4.2 12.4 Change in farm inventories 3.6 1.0 2.9 -573.9 -535.9 -546.2 4.3 1.5 1.7 1.4 1.6 1.8 Final Sales Residential Investment Level in chained 2000 dollars: Net Exports Price Indexes: Total PCE Chain Price Index Core PCE Chain Price Index Page 1 of 1 October 30-31, 2007 Authorized for Public Release Appendix 4: Materials used by Mr. Madigan 159 of 162 October 30-31, 2007 Authorized for Public Release 160 of 162 Class I FOMC – Restricted Controlled (FR) Material for FOMC Briefing on Monetary Policy Alternatives Brian Madigan October 31, 2007 October 30-31, 2007 Class I FOMC – Restricted Controlled (FR) Policy Decision Rationale Assessment of Risk Authorized for Public Release Table 1: Alternative Language for the October 2007 FOMC Announcement 161 of 162 Bluebook version September FOMC Alternative A Alternative B Alternative C 1. The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent. The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent. The Federal Open Market Committee decided today to keep its target for the federal funds rate at 4-3/4 percent. The Federal Open Market Committee decided today to keep its target for the federal funds rate at 4-3/4 percent. 2. Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time. Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow somewhat in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time. Economic growth was solid in the third quarter despite an intensification of the housing correction. Strains in financial markets have eased somewhat on balance, reducing the downside risks to growth. Though incoming indicators point to some near-term slowing in the pace of economic expansion, the recent easing of monetary policy should help promote moderate growth over time. 3. Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. 4. Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth. Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. The Committee judges that the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth. Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. The pace of economic expansion will likely slow somewhat in the near term, partly reflecting the intensification of the housing correction. But, to date, other sectors of the economy have proven resilient and the global economy remains strong. The Committee anticipates that the economic expansion will return to a moderate pace over time, but sees continuing risks to growth, notably the potential impact of the tightening of credit conditions for some households and businesses. Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. On balance, the Committee views downside risks to growth as the greater policy concern. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth. Readings on core inflation have improved modestly this year, but the high level of resource utilization and recent increases in energy prices may put renewed upward pressures on overall and core inflation. The Committee judges that the upside risks to inflation roughly balance the downside risks to growth. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information. October 30-31, 2007 Class I FOMC – Restricted Controlled (FR) September FOMC Policy Decision Rationale Assessment of Risk Authorized for Public Release Table 1: Alternative Language for the October 2007 FOMC Announcement Alternative A Alternative B 162 of 162 Revised: October 31, 2007 Alternative C 1. The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent. The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent. The Federal Open Market Committee decided today to keep its target for the federal funds rate at 4-3/4 percent. The Federal Open Market Committee decided today to keep its target for the federal funds rate at 4-3/4 percent. 2. Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time. Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time. Economic growth was solid in the third quarter despite an intensification of the housing correction. Strains in financial markets have eased somewhat on balance, reducing the downside risks to growth. Though incoming indicators point to some near-term slowing in the pace of economic expansion, the recent easing of monetary policy should help promote moderate growth over time. 3. Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth. Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. The pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. But, to date, other sectors of the economy have proven resilient and the global economy remains strong. The Committee anticipates that the economic expansion will return to a moderate pace over time, but sees continuing risks to growth, notably the potential impact of the tightening of credit conditions for some households and businesses. Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. 4. Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth. On balance, the Committee views downside risks to growth as the greater policy concern. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth. Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. The Committee judges that the upside risks to inflation roughly balance the downside risks to growth. Future policy adjustments will depend on the outlook for both inflation and economic growth, as implied by incoming information.
@FedFRASER