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September 16–17, 2014 Authorized for Public Release Appendix 1: Materials used by Mr. Potter and Ms. Logan 185 of 232 September 16–17, 2014 Authorized for Public Release Class II FOMC – Restricted (FR) Material for Briefing on Financial Developments and Open Market Operations Simon Potter and Lorie Logan September 16, 2014 186 of 232 September 16–17, 2014 Authorized for Public Release 187 of 232 Class II FOMC – Restricted (FR) Exhibit 1 (1) Implied Federal Funds Rate Path* (2) Probability Distribution of the Pace of Tightening After Liftoff* 12/17/13 09/12/14 Median Jun '14 SEP Projection Percent Year One Year Two Percent 2.5 35 30 25 20 15 10 5 0 2.0 1.5 1.0 0.5 0-50 0.0 06/30/14 06/30/15 06/30/16 5.0 4.5 May '13 JEC 2.8 4.0 2.6 3.5 2.4 3.0 2.2 2.5 2.0 2.0 1.8 1.5 01/01/13 07/01/13 01/01/14 07/01/14 Source: Bloomberg 07/01/13 01/01/14 07/01/14 (6) Currency Performance Against the Dollar* 07/29/14 - 09/12/14 05/07/14 - 07/29/14 U.S. U.K. Euro Area BPS 1.6 01/01/13 FOMC Source: Federal Reserve Board of Governors (5) Changes in Futures Rates Over Intermeeting Period* 20 CAD 10 MXN 0 EM FX -10 GBP -20 -30 Sep '14 Five-Year Five-Year, Five-Year 3.0 FOMC JEC >200 (4) U.S. Inflation Compensation Percent May '13 151-200 *Average of dealers’ and buy side market participants’ probabilities. Conditional on the target not returning to the zero lower bound. The average probability assigned to this scenario was 80%. Source: Federal Reserve Bank of New York (3) Nominal Five-Year, Five-Year Forward Rates U.S. U.K. Germany 101-150 Basis Points 06/30/17 *Derived from federal funds futures and Eurodollar futures. Source: Bloomberg, Federal Reserve Bank of New York, Federal Reserve Board of Governors Percent 51-100 Depreciation Against Dollar JPY Sep '15 Sep '16 Sep '17 Sep '18 Sep '19 Contract Expiry *Changes in Eurodollar, Short Sterling and Euribor futures-implied rates for the U.S., U.K., and Euro Area, respectively. Source: Bloomberg EUR -8 -6 -4 -2 Percent *DXY dollar index appreciated by 3.7 percent since 07/29/14. Source: Bloomberg, J.P. Morgan +0 +2 September 16–17, 2014 Authorized for Public Release 188 of 232 Class II FOMC – Restricted (FR) Exhibit 2 (7) Standardized Implied Volatility Indices* (8) Euro-Dollar Performance Aggregate Equity and Rate Volatility Index** Currency Volatility Index*** Standard Deviations 0.5 Dollars Per Euro 1.40 FOMC 0.0 Sep '14 ECB 1.38 -0.5 1.36 -1.0 1.34 -1.5 1.32 -2.0 01/01/13 07/01/13 01/01/14 07/01/14 *Standardized using all daily observations since June 1994. **One-month equity, short- and long-rate implied volatilities. ***One-month developed market currency implied volatility. Source: Bloomberg, CBOE, Barclays, Deutsche Bank, Federal Reserve Bank of New York Staff Calculations May '14 ECB 1.30 1.28 01/01/14 03/01/14 07/01/14 09/01/14 (10) Total ECB Assets € Billions Two-Year, One-Year (LHS) Five-Year, Five-Year (RHS) Percent 3,250 Percent May '14 ECB 05/01/14 Source: Bloomberg (9) Euro-Area Forward Inflation Swaps 1.6 Jackson Hole Jackson Hole 2.3 1.4 2.2 1.2 2.1 Q1 2012 Level 3,000 2,750 2,500 2,250 1.0 2.0 Sep '14 ECB 0.8 01/01/14 1.9 03/01/14 05/01/14 07/01/14 09/01/14 Source: Barclays 2,000 1,750 01/01/11 € Billions 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 *Assuming TLTRO take-up equals midpoint of estimated range. Source: European Central Bank, SIFMA, European Covered Bond Council, Dealer Estimates, Federal Reserve Bank of New York Staff Calculations 01/01/13 01/01/14 Source: Haver Analytics, European Central Bank (12) Spot and Forward EONIA (11) European ABS and Covered Bond Markets Estimated Range of TLTRO Take-Up Midpoint of Estimated TLTRO Take-Up Securities Not Retained by Issuer € Billions Purchases to Reach Q1 2012 Level* 1,800 1,600 1,400 1,200 1,000 800 600 400 36% 200 0 TLTROs ABS and Covered Bonds 01/01/12 One-Year, One-Year Spot Percent 0.7 May '14 ECB 0.6 Sep '14 ECB 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 01/01/14 03/01/14 Source: Bloomberg 05/01/14 07/01/14 09/01/14 September 16–17, 2014 Authorized for Public Release 189 of 232 Class II FOMC – Restricted (FR) Exhibit 3 (13) SOMA Euro Portfolio Asset Allocation* Bench- Pre-Jun mark '14 ECB Current Allocation (Percent) Cash Official Deposits Of Which: Banque de France RRPs Securities Held Outright 0.0 50.0 12.5 17.5 32.5 Duration (Months) 12.4 37.7 12.5 17.5 32.5 0.0 63.1 45.9 0.0 36.9 9.44 11.06 Duration Limits (Months) Internal Duration Limit Maximum Authorized Duration (14) Central Bank Liquidity Swaps Outstanding $ Billions ECB BoJ 10 8 6 4 2 12.00 18.00 *Includes unsettled positions as of 09/12/14. Source: Federal Reserve Bank of New York 0 01/01/13 01/01/14 07/01/14 Source: Federal Reserve Bank of New York (15) SOMA Portfolio Holdings Expectations* Interquartile Range Median $ Billions 07/01/13 (16) Overnight Interest Rates Primary Dealer Survey Rate Fed Funds Effective Rate ON RRP Rate BPS 4,500 12 4,250 10 4,000 3,750 8 3,500 End of Purchases: Oct 2014 Liftoff: Q2-Q3 2015 End of Reinvestments: 6 months after liftoff 3,250 3,000 2,750 Q1 '13 6 4 Q1 '14 Q1 '15 Q1 '16 Q1 '17 *Based on all responses from the Survey of Primary Dealers and Survey of Market Participants. Inset box shows medians. Source: Federal Reserve Bank of New York 2 04/07/14 $ Billions 06/16/14 07/21/14 08/25/14 (18) FR 2420 Federal Funds Borrowing* $ Billions Rest of World Euro Area Canada Sweden and Norway U.K. U.S. 70 350 Prior Period Average 300 250 Current Period Average 60 50 200 40 150 30 100 20 10 50 0 04/07/14 05/12/14 Current Period Average Source: Federal Reserve Bank of New York (17) Overnight RRP Operation Results Total Allotment Total Allotment on Month- or Quarter-End Prior Period Average 05/13/14 06/18/14 Source: Federal Reserve Bank of New York 07/24/14 08/28/14 0 04/07/14 05/12/14 06/16/14 07/21/14 *Trip wires indicate month- and quarter-end dates. Source: Federal Reserve Bank of New York 08/25/14 September 16–17, 2014 Authorized for Public Release 190 of 232 Class II FOMC – Restricted (FR) Exhibit 4 (Last) (19) Expected IOER–ON RRP Rate Spread and ON RRP Usage Immediately Following Liftoff* ON RRP Usage at Liftoff ($ Billions) Jun '14 (20) Evolution of Expected ON RRP Usage* Average $ Billions Sep '14 800 700 600 500 400 300 200 100 0 1,750 1,500 1,250 1,000 750 500 250 0 0 10 20 30 Immediately Following Liftoff 40 IOER-ON RRP Rate Spread at Liftoff (BPS) *Based on all responses from the Survey of Primary Dealers and Survey of Market Participants. Excludes five outliers expecting a negative IOER-ON RRP rate spread and one outlier expecting $2 trillion in ON RRP usage. Source: Federal Reserve Bank of New York (22) Distribution of Expectations for Change in IOER-FF Effective Rate Spread Over Time* Number of Respondents Average 0.55 10 8 6 4 2 0 0.50 0.45 0.40 0.35 0.30 Expect FFER to trade firmer to IOER < -20 -11 to -20 0.25 0.20 IOER FFER Three Years Following Liftoff *Based on responses of the Primary Dealers and Market Participants who expect a 25-basis-point spread between the IOER and ON RRP rates immediately following liftoff through three years following liftoff. Boxes show interquartile ranges and medians. Source: Federal Reserve Bank of New York (21) Expected Distribution of Policy Rates Immediately Following Liftoff* Percent One Year Following Liftoff ON RRP *Based on all responses from the Survey of Primary Dealers and Survey of Market Participants. Boxes show interquartile ranges and medians. Source: Federal Reserve Bank of New York • Potential Features to Test o Circuit-breaker cap that adjusts with average prior usage o Small changes in ON RRP rate o Moderate adjustments up and down to overall size limit 0 BPS +1 to +11 to +10 +20 > 20 *Change from immediately following liftoff to three years following liftoff. Based on responses of the Primary Dealers and Market Participants who expect a 25-basis-point spread between the IOER and ON RRP rates immediately following liftoff through three years following liftoff. Source: Federal Reserve Bank of New York (23) ON RRP Facility Testing • Proposed Test o Leave ON RRP rate at 5 basis points o Raise per-counterparty limit from $10 to $30 billion o Limit overall size to $300 billion o Auction process if aggregate bids exceed overall limit o Begin Sep 22, extend at least through Oct meeting -1 to -10 (24) TDF Allotment and Offered Rate Total Allotment (LHS) Offered Rate (RHS) $ Billions 180 160 140 120 100 80 60 40 20 0 $3 Bil. $5 Bil. $7 Bil. Percent 0.35 $10 Bil. 0.30 0.25 0.20 05/19/14 06/09/14 Source: Federal Reserve Board of Governors 06/30/14 September 16–17, 2014 Authorized for Public Release Appendix 2: Materials used by Ms. Logan 191 of 232 September 16–17, 2014 Authorized for Public Release Class II FOMC – Restricted (FR) Overnight Reverse Repurchase Agreement Resolution and Related Desk Statement September 16, 2014 192 of 232 September 16–17, 2014 Authorized for Public Release 193 of 232 Class II FOMC – Restricted (FR) Proposed Resolution on Overnight Reverse Repurchase Agreements “The Federal Open Market Committee (FOMC) authorizes the Federal Reserve Bank of New York to conduct a series of overnight reverse repurchase operations involving U.S. Government securities for the purpose of further assessing the appropriate structure of such operations in supporting the implementation of monetary policy during normalization. The reverse repurchase operations authorized by this resolution shall be (i) conducted at an offering rate that may vary from zero to five basis points, (ii) for an overnight term, or such longer term as is warranted to accommodate weekend, holiday, and similar trading conventions, (iii) subject to a percounterparty limit of up to $30 billion per day, (iv) subject to an overall size limit of up to $300 billion per day, (v) awarded to all submitters (A) at the specified offering rate if the sum of the bids received is less than or equal to the overall size limit, or (B) at the stopout rate, determined by evaluating bids in ascending order by submitted rate up to the point at which the total quantity of bids equals the overall size limit, with all bids below this rate awarded in full at the stopout rate and all bids at the stopout rate awarded on a pro rata basis, if the sum of the counterparty offers received is greater than the overall size limit, and (vi) offered beginning with the operation conducted on September 22, 2014, with the resolution adopted at the January 28-29, 2014, FOMC meeting remaining in place until the conclusion of the operation conducted on September 19, 2014. The Chair must approve any change in the offering rate within the range specified in (i) and any changes to the percounterparty and overall size limits subject to the limits specified in (iii) and (iv). The System Open Market Account manager will notify the FOMC in advance about any changes to the offering rate, per-counterparty limit, or overall size limit applied to operations. These operations shall be authorized through January 30, 2015.” Page 1 of 3 September 16–17, 2014 Authorized for Public Release 194 of 232 Class II FOMC – Restricted (FR) Proposed Desk Statement on Overnight Reverse Repurchase Agreements “As noted in the October 19, 2009, Statement Regarding Reverse Repurchase Agreements, the Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York (New York Fed) has been working internally and with market participants on operational aspects of tri-party reverse repurchase agreements (RRPs) to ensure that this tool will be ready to support the monetary policy objectives of the Federal Open Market Committee (FOMC). The Federal Reserve continues to enhance operational readiness and increase its understanding of the impact of RRPs through technical exercises. In further support of its objectives, the FOMC instructed the Desk to change the design of these RRP operations. Effective Monday, September 22, 2014, each eligible counterparty will be limited to one bid of up to $30 billion per day, an increase from the current $10 billion per-counterparty maximum bid limit, and each operation will be subject to an overall size limit of $300 billion. Each submitted request must include a rate of interest, subject to a specified maximum, which would apply only in the event that the total amount of offers received by the New York Fed exceeds the overall size limit of the operation. If the sum of the bids received is less than or equal to the overall size limit, awards will be made at the specified offering rate to all submitters. If the sum of the bids received is greater than the overall size limit, awards will be allocated using a single-price auction based on the “stopout” rate at which the overall size limit is reached, with all bids below this rate awarded in full at the stopout rate and all bids at this rate awarded on a pro rata basis at the stopout rate. The stopout rate will be determined by evaluating all bids in ascending order by submitted rate up to the point at which the total quantity of offers equals the overall size limit. The offering rate will be set at 0.05 percent (five basis points). The operations will be open to all eligible RRP counterparties, will use Treasury collateral, will settle same-day, and will have an overnight tenor. The RRP operations will be held from 12:45 to 1:15 pm (Eastern Time). Any future changes to these RRP operations will be announced with at least one business day’s prior notice on the New York Fed’s website. Page 2 of 3 September 16–17, 2014 Authorized for Public Release 195 of 232 Class II FOMC – Restricted (FR) Like earlier operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future. The results of these operations will be posted on the public website of the New York Fed, together with the results for other temporary open market operations. The outstanding amounts of RRPs are reported as a factor absorbing reserves in Table 1 in the Federal Reserve's H.4.1 statistical release and as liability items in Tables 8 and 9 of that release. The outstanding amounts of RRPs by remaining maturity are reported in Table 2 of the release.” Page 3 of 3 September 16–17, 2014 Authorized for Public Release Appendix 3: Materials used by Chair Yellen 196 of 232 September 16–17, 2014 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Material for Finalization of Normalization Principles September 16, 2014 197 of 232 September 16–17, 2014 Authorized for Public Release 198 of 232 Class I FOMC – Restricted Controlled (FR) Proposed Policy Normalization Principles and Plans During its recent meetings, the Federal Open Market Committee (FOMC) discussed ways to normalize the stance of monetary policy and the Federal Reserve’s securities holdings. The discussions were part of prudent planning and do not imply that normalization will necessarily begin soon. The Committee continues to judge that many of the normalization principles that it adopted in June 2011 remain applicable. However, in light of the changes in the System Open Market Account (SOMA) portfolio since 2011 and enhancements in the tools the Committee will have available to implement policy during normalization, the Committee has concluded that some aspects of the eventual normalization process will likely differ from those specified earlier. The Committee also has agreed that it is appropriate at this time to provide additional information regarding its normalization plans. [ All but ____ FOMC participants have agreed on the following key elements of the approach they intend to implement when it becomes appropriate to begin normalizing the stance of monetary policy: ] The Committee will determine the timing and pace of policy normalization— meaning steps to raise the federal funds rate and other short-term interest rates to more normal levels and to reduce the Federal Reserve’s securities holdings—so as to promote its statutory mandate of maximum employment and price stability. o When economic conditions and the economic outlook warrant a less accommodative monetary policy, the Committee will raise its target range for the federal funds rate. o During normalization, the Federal Reserve intends to move the federal funds rate into the target range set by the FOMC primarily by adjusting the interest rate it pays on excess reserve balances. o During normalization, the Federal Reserve intends to use an overnight reverse repurchase agreement facility and other supplementary tools as needed to help control the federal funds rate. The Committee will use an overnight reverse repurchase agreement facility only to the extent necessary and will phase it out when it is no longer needed to help control the federal funds rate. Page 1 of 2 September 16–17, 2014 Authorized for Public Release 199 of 232 Class I FOMC – Restricted Controlled (FR) The Committee intends to reduce the Federal Reserve’s securities holdings in a gradual and predictable manner primarily by ceasing to reinvest repayments of principal on securities held in the SOMA. o The Committee expects to cease or commence phasing out reinvestments after it begins increasing the target range for the federal funds rate; the timing will depend on how economic and financial conditions and the economic outlook evolve. o The Committee currently does not anticipate selling agency mortgage-backed securities as part of the normalization process, although limited sales might be warranted in the longer run to reduce or eliminate residual holdings. The timing and pace of any sales would be communicated to the public in advance. The Committee intends that the Federal Reserve will, in the longer run, hold no more securities than necessary to implement monetary policy efficiently and effectively, and that it will hold primarily Treasury securities, thereby minimizing the effect of Federal Reserve holdings on the allocation of credit across sectors of the economy. The Committee is prepared to adjust the details of its approach to policy normalization in light of economic and financial developments. Page 2 of 2 September 16–17, 2014 Authorized for Public Release Appendix 4: Materials used by Mr. Wilcox 200 of 232 September 16–17, 2014 Authorized for Public Release Class II FOMC – Restricted (FR) Material for Forecast Summary David Wilcox September 16, 2014 201 of 232 September 16–17, 2014 Authorized for Public Release 202 of 232 Class II FOMC - Restricted (FR) Forecast Summary Confidence Intervals Based on FRB/US Stochastic Simulations 1. Real GDP 2. Unemployment Rate Percent change, annual rate 10 Sept. TB July TB 70% confidence interval 8 10 8 6 6 4 4 2 2 0 0 -2 -4 2013 2014 2015 2016 2017 Percent 11 Sept. TB July TB June TB Sept. 2012 TB 70% conf. interval 10 9 8 11 10 9 8 7 7 6 6 5 -2 4 -4 3 5 Natural Rate with EEB* 4 2013 2014 2015 2016 2017 3 *Effect of emergency unemployment compensation and state-federal extended benefit programs. 3. Total Payroll Employment 4. Labor Market Conditions Index* Millions 147 Sept. TB July TB June TB Sept. 2012 TB 144 144 Index points 20 10 20 10 0 141 0 141 138 -10 July - Aug. average -10 -20 -20 -30 -30 138 135 132 147 135 2013 2014 2015 2016 2017 132 -40 2009 2010 2011 2012 2013 2014 -40 *Average monthly change over quarter, except as noted. 5. PCE Prices 6. PCE Prices Excluding Food and Energy Percent change, annual rate 5 Percent change, annual rate 5 5 4 4 3 3 3 3 2 2 2 2 1 1 1 1 0 0 0 0 -1 -1 Sept. TB July TB 70% confidence interval 4 -1 2013 2014 2015 2016 2017 Page 1 of 1 Sept. TB July TB 70% confidence interval 2013 2014 2015 5 4 2016 2017 -1 September 16–17, 2014 Authorized for Public Release Appendix 5: Materials used by Mr. Kamin 203 of 232 September 16–17, 2014 Authorized for Public Release Class II FOMC – Restricted (FR) Material for The Foreign Outlook Steven B. Kamin September 16, 2014 204 of 232 September 16–17, 2014 Authorized for Public Release 205 of 232 Exhibit 1 Class II FOMC - Restricted (FR) The Foreign Economic Outlook 1. Foreign GDP 2. Euro-Area GDP Growth Percent change, annual rate Percent change, annual rate 6 4 July TB Emerging market economies 5 3 With 1 trillion euro LSAP 4 Total 3 Advanced foreign economies 2 Absent recent ECB measures Baseline forecast 1 2 0 1 -1 0 -2 -1 2012 2013 2014 2015 3. Euro-Area Inflation 2016 -3 2017 2012 2013 3.0 Monthly Percent change, annual rate 2.5 3.0 2.5 2017 0 Percent 5 year, 5 years forward inflation expectations* -2 2.0 2.0 With 1 trillion euro LSAP 2.4 -4 2.0 -6 10-year German yield 1.5 Absent recent ECB measures 1.0 0.5 0.5 0.0 2014 1.0 0.0 2012 2014 1.4 -10 1.2 Euro-Area business confidence -12 1.0 -14 0.8 Jan May Sep 2013 2016 1.8 1.6 -8 Core 2013 2.6 2.2 Baseline forecast 1.5 2016 Percent balance Quarterly Headline 2015 5. Euro Area 4. Euro-Area Inflation 12-month percent change 2012 2014 Jan May Sep 2014 * Derived from inflation swaps. 6. Unemployment Rate 7. Nominal Wage Growth Percent US 12-month percent change 9.5 8. Output per Hour Worked 2008:Q1 = 100 6 9.0 5 8.5 4 112 110 108 8.0 UK 106 3 104 7.5 2 102 7.0 1 US* 2013 2014 2008 2010 2012 -1 2014 *BLS: Average hourly wage, Total Private. **ONS: Average hourly wage, Total Private. 1 of 2 98 0 6.0 2012 100 UK* UK** 6.5 2011 US** 96 94 2008 2010 2012 2014 * ONS: Output per hour worked, whole economy (SA). ** BLS: Real output per hour of all persons (SA). September 16–17, 2014 Authorized for Public Release 206 of 232 Exhibit 2 (Last) Class II FOMC - Restricted (FR) The Dollar 2. Real Dollar 1. Dollar Exchange Rates May 1, 2014 = 100 2008:Q1 = 100 108 July TB 107 Dollar appreciation 110 106 105 AFE 105 104 Euro area 103 100 102 Broad 101 Broad 95 100 99 United Kingdom 90 EME 98 China 97 May Jun Jul 115 Aug 85 2008 Sep 2 of 2 2010 2012 2014 2016 September 16–17, 2014 Authorized for Public Release Appendix 6: Materials used by Ms. DeBoer 207 of 232 September 16–17, 2014 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Material for Briefing on the Summary of Economic Projections Marnie Gillis DeBoer September 16, 2014 208 of 232 September 16–17, 2014 Authorized for Public Release 209 of 232 Exhibit 1. Central tendencies and ranges of economic projections, 2014–17 and over the longer run Percent Change in real GDP 4 Central tendency of projections Range of projections 3 2 1 + 0 - Actual 2009 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Percent Unemployment rate 10 9 8 7 6 5 2009 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Percent PCE inflation 3 2 1 2009 2010 2011 2012 2013 2014 2015 2016 2017 Longer run Percent Core PCE inflation 3 2 1 2009 2010 2011 2012 2013 2014 Note: The data for the actual values of the variables are annual. Page 1 of 6 2015 2016 2017 Longer run September 16–17, 2014 Authorized for Public Release 210 of 232 Exhibit 2. Economic projections for 2014–17 and over the longer run (percent) Change in real GDP Central Tendency . . . . . . . . June projection . . . . . . Range . . . . . . . . . . . . . . . . . . . June projection . . . . . . Memo: Tealbook** . . . . . . June projection . . . . . . 2014 2.0 to 2.2 2.1 to 2.3 1.8 to 2.3 1.9 to 2.4 2.2 2.4 2015 2.6 to 3.0 3.0 to 3.2 2.1 to 3.2 2.2 to 3.6 2.7 3.0 2016 2.6 to 2.9 2.5 to 3.0 2.1 to 3.0 2.2 to 3.2 2.9 3.2 2017 2.3 to 2.5 n.a. 2.0 to 2.6 n.a. 2.3 NA Longer run 2.0 to 2.3 2.1 to 2.3 1.8 to 2.6 1.8 to 2.5 2.0 2.0 2017 4.9 to 5.3 n.a. 4.7 to 5.8 n.a. 4.9 NA Longer run 5.2 to 5.5 5.2 to 5.5 5.0 to 6.0 5.0 to 6.0 5.2 5.2 2017 1.9 to 2.0 n.a. 1.7 to 2.2 n.a. 1.7 NA Longer run 2.0 2.0 2.0 2.0 2.0 2.0 Unemployment rate Central Tendency . . . . . . . . June projection . . . . . . Range . . . . . . . . . . . . . . . . . . . June projection . . . . . . Memo: Tealbook . . . . . . . . June projection . . . . . . 2014 5.9 to 6.0 6.0 to 6.1 5.7 to 6.1 5.8 to 6.2 5.9 6.0 2015 5.4 to 5.6 5.4 to 5.7 5.2 to 5.7 5.2 to 5.9 5.4 5.4 2016 5.1 to 5.4 5.1 to 5.5 4.9 to 5.6 5.0 to 5.6 5.1 5.0 PCE infation Central Tendency . . . . . . . . June projection . . . . . . Range . . . . . . . . . . . . . . . . . . . June projection . . . . . . Memo: Tealbook . . . . . . . . June projection . . . . . . 2014 1.5 to 1.7 1.5 to 1.7 1.5 to 1.8 1.4 to 2.0 1.5 1.5 2015 1.6 to 1.9 1.5 to 2.0 1.5 to 2.4 1.4 to 2.4 1.5 1.4 2016 1.7 to 2.0 1.6 to 2.0 1.6 to 2.1 1.5 to 2.0 1.6 1.5 Core PCE infation Central Tendency . . . . . . . . June projection . . . . . . Range . . . . . . . . . . . . . . . . . . . June projection . . . . . . Memo: Tealbook . . . . . . . . June projection . . . . . . 2014 1.5 to 1.6 1.5 to 1.6 1.5 to 1.8 1.4 to 1.8 1.5 1.5 2015 1.6 to 1.9 1.6 to 2.0 1.6 to 2.4 1.5 to 2.4 1.6 1.6 2016 1.8 to 2.0 1.7 to 2.0 1.7 to 2.2 1.6 to 2.0 1.7 1.7 2017 1.9 to 2.0 n.a. 1.8 to 2.2 n.a. 1.8 NA * The changes in real GDP and infation are measured Q4/Q4. ** The September 2014 Tealbook value that was updated on September 12, 2014, is reported here. Page 2 of 6 September 16–17, 2014 Authorized for Public Release 211 of 232 Exhibit 3. Overview of FOMC participants’ assessments of appropriate monetary policy Number of participants Appropriate timing of policy firming September projections June projections 15 14 14 13 12 11 10 9 8 7 6 5 4 3 2 1 2014 2 1 2015 2016 Note: The height of each bar denotes the number of FOMC participants who judge that, under appropriate monetary policy, the first increase in the target range for the federal funds rate from its current range of 0 to 1/4 percent will occur in the specified calendar year. Page 3 of 6 September 16–17, 2014 Authorized for Public Release 212 of 232 Exhibit 4. Overview of FOMC participants’ assessments of appropriate monetary policy Percent Appropriate pace of policy firming Target federal funds rate or midpoint of target range at year-end 5 September projections 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2014 2015 2016 2017 Longer run Percent Appropriate pace of policy firming Target federal funds rate or midpoint of target range at year-end 5 June projections 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2014 2015 2016 2017 Longer run Note: In the two panels above, each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. Page 4 of 6 September 16–17, 2014 Authorized for Public Release 213 of 232 Exhibit 5. Scatterplot of unemployment and PCE inflation rates in the initial year of policy firming (in percent) PCE inflation 2.5 2.0 1.5 1.0 4.5 5.0 5.5 6.0 Unemployment Rate Year of Firming 2014 2015 2016 Note: When the projections of two or more participants are identical, larger markers, which represent one participant each, are used so that each projection can be seen. Page 5 of 6 September 16–17, 2014 Authorized for Public Release 214 of 232 Exhibit 6. Uncertainty and risks in economic projections Number of participants Uncertainty about GDP growth Risks to GDP growth September projections June projections Lower Broadly similar Number of participants September projections June projections 18 16 14 12 10 8 6 4 2 Higher Weighted to downside Broadly balanced Number of participants Uncertainty about the unemployment rate 18 16 14 12 10 8 6 4 2 Weighted to upside Number of participants Risks to the unemployment rate 18 16 14 12 10 8 6 4 2 Lower Broadly similar 18 16 14 12 10 8 6 4 2 Higher Weighted to downside Broadly balanced Number of participants Uncertainty about PCE inflation Weighted to upside Number of participants Risks to PCE inflation 18 16 14 12 10 8 6 4 2 Lower Broadly similar 18 16 14 12 10 8 6 4 2 Higher Weighted to downside Broadly balanced Number of participants Uncertainty about core PCE inflation Weighted to upside Number of participants Risks to core PCE inflation 18 16 14 12 10 8 6 4 2 Lower Broadly similar Higher 18 16 14 12 10 8 6 4 2 Weighted to downside Page 6 of 6 Broadly balanced Weighted to upside September 16–17, 2014 Authorized for Public Release Appendix 7: Materials used by Mr. English 215 of 232 September 16–17, 2014 Authorized for Public Release Class I FOMC – Restricted Controlled (FR) Material for Briefing on Monetary Policy Alternatives Bill English September 16-17, 2014 216 of 232 September 16–17, 2014 Authorized for Public Release 217 of 232 Market Expectations and Policy Issues Key Policy Issues • "Substantial improvement" in the outlook for the labor market? • "Significant underutilization" of labor resources? • "Considerable time" still appropriate? • Guidance on path of target federal funds rate after liftoff still consistent with outlook? SEP: Unemployment Rate Average Monthly Change in Labor Market Conditions Index Points Index Percent 8.5 7 8.0 6 7.5 5 Sept. 2012 SEP Aug. 2012 Sept. 2014 SEP Historical Data Dec. 2012 7.0 4 6.5 Dec. 2013 3 6.0 Aug. 2014 2 5.5 1 5.0 0 Dec. 2012 Dec. 2013 Dec. 2014 Dec. 2015 Dec. 2016 Dec. 2017 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3* 2012 2013 2014 *Note: Q3 is the average of the monthly changes in July and August. Source: Staff calculations. Note: The blue and red shaded boxes respectively show September 2012 and September 2014 SEP central tendencies. Source: Bureau of Labor Statistics, Sept. 2012 and Sept. 2014 SEP. SEP: Shortfall in FFR From its Longer-Run Level at End of Year in Which Unemployment and Inflation Percent Gaps Close Expected Path of the Federal Funds Rate Percent Sept. Median PD 4.0 0.0 Sept. 2014 SEP 3.5 -0.5 3.0 -1.0 2.5 -1.5 2.0 -2.0 1.5 -2.5 1.0 -3.0 0.5 -3.5 0.0 H1 H2 2015 H1 H2 2016 H1 H2 2017 H1 2018 Note: Median expected path of the federal funds rate is calculated using the midpoint of the reported range or point estimate for each dealer. Red shaded boxes show the September 2014 SEP central tendencies. Source: September 2014 SEP and Primary Dealer Survey. Note: Blue dots represent the difference between the appropriate federal funds rate and the projected longer-run federal funds rate at the end of the first year in which FOMC participants project unemployment and inflation to be within 2/10ths of their respective longer-run values. Chart excludes two FOMC participants who do not project inflation to be within 2/10ths of their respective longer-run values by Q4 2017. Source: September 2014 SEP. Page 1 of 13 September 16–17, 2014 Authorized for Public Release 218 of 232 JULY 2014 FOMC STATEMENT 1. Information received since the Federal Open Market Committee met in June indicates that growth in economic activity rebounded in the second quarter. Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to the Committee’s longer-run objective. Longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat. 3. The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in August, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $10 billion per month rather than $15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 billion per month rather than $20 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate. 4. The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent Page 2 of 13 September 16–17, 2014 Authorized for Public Release 219 of 232 on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. 5. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to ¼ percent target range for the federal funds rate, the Committee will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. 6. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. Page 3 of 13 September 16–17, 2014 Authorized for Public Release 220 of 232 FOMC STATEMENT—SEPTEMBER 2014 ALTERNATIVE A 1. Information received since the Federal Open Market Committee met in June July indicates suggests that growth in economic activity rebounded is expanding at a moderate pace in the second quarter. On balance, labor market conditions improved with somewhat further; however, the unemployment rate declining further is little changed. However, and a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to further below the Committee’s longer-run objective even though longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving gradually toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat the risks to the outlook for inflation as tilted somewhat to the downside. 3. The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in August October, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $10 $5 billion per month rather than $15 $10 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 $10 billion per month rather than $20 $15 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate. 4. The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of end its current Page 4 of 13 September 16–17, 2014 Authorized for Public Release 221 of 232 program of asset purchases in further measured steps at future its next meetings. However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. 5. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to ¼ percent target range for the federal funds rate, the Committee will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and at least as long as inflation between one and two years ahead is projected to be below 2 percent, provided that longer-term inflation expectations remain well anchored. 6. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. Page 5 of 13 September 16–17, 2014 Authorized for Public Release 222 of 232 FOMC STATEMENT—SEPTEMBER 2014 ALTERNATIVE B 1. Information received since the Federal Open Market Committee met in June July indicates suggests that growth in economic activity rebounded is expanding at a moderate pace in the second quarter. On balance, labor market conditions improved with somewhat further; however, the unemployment rate declining further is little changed. However, and a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved been running somewhat closer to below the Committee’s longer-run objective. Longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year. 3. The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in August October, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $10 $5 billion per month rather than $15 $10 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 $10 billion per month rather than $20 $15 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate. 4. The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of end its current program of asset purchases in further measured steps at future its next meetings. Page 6 of 13 September 16–17, 2014 Authorized for Public Release 223 of 232 However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. 5. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to ¼ percent target range for the federal funds rate, the Committee will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. 6. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. Page 7 of 13 September 16–17, 2014 Authorized for Public Release 224 of 232 FOMC STATEMENT—SEPTEMBER 2014 ALTERNATIVE C 1. Information received since the Federal Open Market Committee met in June July indicates suggests that growth in economic activity rebounded is expanding at a moderate pace in the second quarter. On balance, labor market conditions improved with somewhat further, although the unemployment rate declining further is little changed. However Moreover, a range of labor market indicators suggests that there remains significant underutilization of labor resources is diminishing. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to appears to be moving gradually toward the Committee’s longer-run objective. Longer-term inflation expectations have remained stable. 2. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year. 3. The Committee currently judges that there is has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program and continues to anticipate that inflation will move toward the Committee’s longer-run objective. Moreover, the Committee sees sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions progress toward maximum employment in a context of price stability. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program Accordingly, the Committee decided to make a further measured reduction in the pace of its asset purchases conclude its purchase program this month. Beginning in August, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $10 billion per month rather than $15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 billion per month rather than $20 billion per month. 4. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee’s sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader help keep financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee’s dual mandate. The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and Page 8 of 13 September 16–17, 2014 Authorized for Public Release 225 of 232 agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases. 5. To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to ¼ percent target range for the federal funds rate, the Committee will assess progress—both realized and expected—toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable some time after the asset purchase program ends, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. 6. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. Page 9 of 13 September 16–17, 2014 Authorized for Public Release 226 of 232 JULY 2014 DIRECTIVE Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. In particular, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to undertake open market operations as necessary to maintain such conditions. Beginning in August, the Desk is directed to purchase longer-term Treasury securities at a pace of about $15 billion per month and to purchase agency mortgage-backed securities at a pace of about $10 billion per month. The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s agency mortgage-backed securities transactions. The Committee directs the Desk to maintain its policy of rolling over maturing Treasury securities into new issues and its policy of reinvesting principal payments on all agency debt and agency mortgagebacked securities in agency mortgage-backed securities. The System Open Market Account manager and the secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability. Page 10 of 13 September 16–17, 2014 Authorized for Public Release 227 of 232 DIRECTIVE FOR SEPTEMBER 2014 ALTERNATIVE A Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. In particular, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to undertake open market operations as necessary to maintain such conditions. Beginning in August October, the Desk is directed to purchase longer-term Treasury securities at a pace of about $15 $10 billion per month and to purchase agency mortgage-backed securities at a pace of about $10 $5 billion per month. The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s agency mortgage-backed securities transactions. The Committee directs the Desk to maintain its policy of rolling over maturing Treasury securities into new issues and its policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The System Open Market Account manager and the secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability. Page 11 of 13 September 16–17, 2014 Authorized for Public Release 228 of 232 DIRECTIVE FOR SEPTEMBER 2014 ALTERNATIVE B Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. In particular, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to undertake open market operations as necessary to maintain such conditions. Beginning in August October, the Desk is directed to purchase longer-term Treasury securities at a pace of about $15 $10 billion per month and to purchase agency mortgage-backed securities at a pace of about $10 $5 billion per month. The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s agency mortgage-backed securities transactions. The Committee directs the Desk to maintain its policy of rolling over maturing Treasury securities into new issues and its policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The System Open Market Account manager and the secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability. Page 12 of 13 September 16–17, 2014 Authorized for Public Release 229 of 232 DIRECTIVE FOR SEPTEMBER 2014 ALTERNATIVE C Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. In particular, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to ¼ percent. The Committee directs the Desk to undertake open market operations as necessary to maintain such conditions. Beginning in August The Desk is directed to purchase conclude the current program of purchases of longer-term Treasury securities at a pace of about $15 billion per month and to purchase agency mortgage-backed securities at a pace of about $10 billion per month by the end of September. The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve’s agency mortgage-backed securities transactions. The Committee directs the Desk to maintain its policy of rolling over maturing Treasury securities into new issues and its policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The System Open Market Account manager and the secretary will keep the Committee informed of ongoing developments regarding the System’s balance sheet that could affect the attainment over time of the Committee’s objectives of maximum employment and price stability. Page 13 of 13 September 16–17, 2014 Authorized for Public Release Appendix 8: Materials used by Mr. Wilcox 230 of 232 September 16–17, 2014 Authorized for Public Release Class II FOMC – Restricted (FR) Material for Consumer Price Index Update David Wilcox September 17, 2014 231 of 232 September 16–17, 2014 Authorized for Public Release 232 of 232 Class II FOMC-Restricted (FR) Recent Changes in Consumer Price Indexes (Percent changes) Monthly change Jtme July Aug. Total CPI September TB Food 0.3 0.1 0.1 0.4 0.2 0.1 1.6 -0.3 -2.6 September TB Energy 2013 1.5 2014 1.7 1.8 -2.5 September TB Core CPI September TB -0.2 -0.1 Aug./Aug. change 0.1 0.1 0.0 0.2 Note: August 2014 CPI data released at 8:30a.m on September 17, 2014. 1.8 1.7 1.9
@FedFRASER