Full text of Monetary Trends : May 2005
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MonetaryTrends May 2005 Has the Bond Market Forgotten Oil? T that even a large increase in the price of oil will not have a he financial press often links daily activity in financial substantial impact on the long-run rate of inflation. markets to general economic news. As of late, the The U.S. economy was just beginning to emerge from a world price of oil has been one of the most often cited recession when the price of oil began to rise in late 2001. Inflacauses of fluctuations in securities prices. Rising oil prices tion was low and, unlike most recoveries, payroll employment have been blamed for declining stock prices, weakness in the failed to grow. Few analysts viewed inflation as a threat and, dollar exchange rate, and, to some extent, movements in as employment continued to lag, a few warned that deflation government bond yields. Still, compared with other periods of was possible. In this environment, government security yields rising oil prices, the bond market’s reaction has been limited. remained low. Since the oil crises of the 1970s, the yields on government More recently, employment growth has resumed and deflasecurities have typically risen when the price of oil has risen, tion fears have evaporated. However, the rising price of oil is and fallen when the price of oil has fallen. In the 1970s, a still not widely viewed as a precursor to higher inflation. In part, rising price of oil often presaged a sustained increase in the this could reflect the fact that U.S. firms are more energy effirate of inflation; bond investors responded by demanding cient than they were in the 1970s. Many analysts also believe higher nominal yields to protect their real returns. Similarly, in that the price of oil will decline from its recent high level. In the 1980s and 1990s, when oil prices and inflation generally addition, however, many commentators argue that the Federal fell, bond yields also fell. Reserve is unlikely to allow higher energy prices to result in a The chart illustrates the positive long-run correlation sustained increase in the rate of inflation. When the price of oil between the price of oil and government security yields from rose in the 1970s, the Fed failed to tighten monetary policy the 1970s through the 1990s. Alongside the price of oil, the sufficiently to prevent higher inflation and bond yields. The chart shows the yield on 10-year U.S. Treasury securities. importance of maintaining a stable price level is much more To highlight longer-term relationships, both series are plotted widely recognized today than in the 1970s, and the bond market as eight-quarter moving averages, which smoothes out shorthas considerable faith that the Fed will not allow inflation to run fluctuations in the data. rise (or fall) significantly from its present level. As long as such The chart also illustrates that the yield on government faith persists, the price of oil can rise and fall without causing securities trended downward between 2001 and 2004, even large movements in bond yields. as the price of oil more the doubled, and offers a clue for this unusual pattern: The increase in the price of oil was not —David C. Wheelock accompanied by a significant increase in the overall rate of inflation (shown here as the eight-quarter moving average of the year-over-year percent Oil Prices, Government Security Yields, and Inflation, 1970-2004 change in the consumer price index). Percent Annual Rate Dollars per Barrel The price of oil hit its recent low in December 40 16 Oil Price (left scale) 1998 and has risen almost continuously since 14 Security Yield (right scale) December 2001. While the increase in the price Inflation Rate (right scale) 12 30 of oil in 1999 and 2000 was accompanied by a modest increase in bond yields and consumer 10 price inflation, the increase that began in 2001 8 20 has had little or no perceptible effect on either 6 bond yields or inflation. The current lack of a 4 10 response of bond yields to the rising price of oil 2 probably reflects both the overall condition of 0 0 the U.S. economy when the price of oil began to 1970 1974 1978 1982 1986 1990 1994 1998 2002 rise and confidence on the part of bond investors Views expressed do not necessarily reflect official positions of the Federal Reserve System. research.stlouisfed.org Contents Page 3 4 6 7 8 9 10 11 12 14 15 16 18 Monetary and Financial Indicators at a Glance Monetary Aggregates and Their Components Monetary Aggregates: Monthly Growth Reserves Markets and Short-Term Credit Flows Measures of Expected Inflation Interest Rates Policy-Based Inflation Indicators Implied Forward Rates, Futures Contracts, and Inflation-Indexed Securities Velocity, Gross Domestic Product, and M2 Bank Credit Stock Market Index and Foreign Inflation and Interest Rates Reference Tables Definitions, Notes, and Sources Conventions used in this publication: 1. Unless otherwise indicated, data are monthly. 2. Shaded areas indicate recessions, as determined by the National Bureau of Economic Research. 3. Percent change at an annual rate is the simple, not compounded, monthly percent change multiplied by 12. For example, using consecutive months, the percent change at an annual rate in x between month t –1 and the current month t is: [(xt /x t – 1 )–1] × 1200. Note that this differs from National Economic Trends. In that publication, monthly percent changes are compounded and expressed as annual growth rates. 4. The percent change from year ago refers to the percent change from the same period in the previous year. For example, the percent change from year ago in x between month t –12 and the current month t is: [(xt /x t – 12 )–1] × 100. We welcome your comments addressed to: Editor, Monetary Trends Research Division Federal Reserve Bank of St. Louis P.O. Box 442 St. Louis, MO 63166-0442 or to: stlsFRED@stls.frb.org Monetary Trends is published monthly by the Research Division of the Federal Reserve Bank of St. Louis. Visit the Research Division’s website at research.stlouisfed.org/publications/mt to download the current version of this publication or register for e-mail notification updates. For more information on data in the publication, please visit research.stlouisfed.org/fred2 or call (314) 444-8590. updated through 04/19/05 Monetary Trends M2 and MZM Reserve Market Rates Billions of dollars Percent 6900 4.50 Effective Federal Funds Rate Intended Federal Funds Rate 4.00 6650 MZM 3.50 6400 3.00 6150 Primary Credit Rate 2.50 2.00 M2 5900 1.50 5650 1.00 Discount Rate 5400 0.50 2002 2002 2003 2003 2004 2004 2005 2005 2006 Adjusted Monetary Base 2002 2002 2003 2003 2004 2004 2005 2005 2006 Treasury Yield Curve Percent change at an annual rate Percent 30 6.0 5.5 5.0 20 Week Ending: 04/16/04 03/18/05 04/15/05 4.5 4.0 10 3.5 3.0 0 2.5 2.0 -10 1.5 1.0 -20 0.5 2002 2002 2003 2003 2004 2004 2005 2005 3m 1y 2y 3y 5y 7y 10y 2006 Total Bank Credit Interest Rates Jan 05 Feb 05 Federal Funds Rate 2.28 2.50 2.63 Prime Rate 5.25 5.49 5.58 Primary Credit Rate 3.25 3.49 3.58 Conventional Mortgage Rate 5.71 5.63 5.93 . . . 3-Month Constant Maturity . 2.37 . 2.58 . 2.80 6-Month Constant Maturity 2.68 2.85 3.09 1-Year Constant Maturity 2.86 3.03 3.30 3-Year Constant Maturity 3.39 3.54 3.91 5-Year Constant Maturity 3.71 3.77 4.17 10-Year Constant Maturity 4.22 4.17 4.50 Percent change at an annual rate 30 20 Treasury Yields: 10 0 Mar 05 -10 2002 2002 2003 2003 2004 2004 2005 2005 2006 Research Division Federal Reserve Bank of St. Louis 3 updated through 04/18/05 Monetary Trends MZM and M1 Percent change from year ago 25 20 15 10 MZM 5 0 M1 -5 -10 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 M2 Percent change from year ago 15 10 5 0 -5 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 M3 Percent change from year ago 15 10 5 0 -5 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Monetary Services Index - M2 Percent change from year ago 15 10 5 0 -5 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Research Division 4 Federal Reserve Bank of St. Louis updated through 04/18/05 Monetary Trends Adjusted Monetary Base Percent change from year ago 20 15 10 5 0 -5 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 02 2002 2003 03 2004 04 2005 Domestic Nonfinancial Debt Currency Held by the Nonbank Public Percent change from year ago Percent change from year ago 15 15 05 2006 10 10 5 Total 0 5 -5 Federal -10 0 1997 1998 1999 2000 2001 2002 2003 2004 1997 1998 1999 2000 2001 2002 2003 2004 2005 2002 2002 2003 2003 2004 2004 2005 Time Deposits Checkable and Savings Deposits Percent change from year ago Percent change from year ago 30 30 25 25 20 20 15 15 10 10 Large Denomination 5 0 -5 -5 2002 2002 2003 2003 Savings 2004 Checkable -10 Small Denomination -15 2006 5 0 -10 2005 -15 2004 2005 2005 2006 Money Market Mutual Fund Shares 2002 2002 2003 2003 2004 2004 2005 2005 2006 Repurchase Agreements and Eurodollars Percent change from year ago Billions of dollars 50 600 40 550 Billions of dollars 450 400 Repos (left) 30 Institutional Funds 500 350 450 300 20 10 400 0 250 Eurodollars (right) 350 -10 Retail Funds -20 2002 2002 2003 200 300 2003 2004 2004 2005 2005 2006 150 2002 2003 2004 2005 Research Division Federal Reserve Bank of St. Louis 5 updated through 04/18/05 Monetary Trends M1 Percent change at an annual rate 80 60 40 20 0 -20 -40 -60 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 MZM Percent change at an annual rate 40 30 20 10 0 -10 -20 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 M2 Percent change at an annual rate 40 30 20 10 0 -10 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 M3 Percent change at an annual rate 40 30 20 10 0 -10 -20 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Research Division 6 Federal Reserve Bank of St. Louis updated through 04/18/05 Monetary Trends Adjusted and Required Reserves Billions of dollars 120 100 Adjusted 80 60 Required 40 20 0 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 Total Borrowings, nsa Excess Reserves plus RCB Contracts Billions of dollars Billions of dollars 0.8 16 05 2006 0.6 12 0.4 8 0.2 0.0 4 1998 1999 2000 2001 2002 2003 2004 2005 1998 1999 2000 2001 2002 2003 2004 2005 2006 1998 1999 2000 2001 2002 2003 2004 2005 1998 1999 2000 2001 2002 2003 2004 2005 2006 *Actual value for September 2001 is $3.4 billion. *Actual value for September 2001 is $26.43 billion. Nonfinancial Commercial Paper Percent change from year ago 60 40 20 0 -20 -40 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Consumer Credit Percent change from year ago 20 15 10 5 0 -5 -10 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Research Division Federal Reserve Bank of St. Louis 7 updated through 04/05/05 Monetary Trends Inflation and Inflation Expectations Percent 10 8 6 Humphrey-Hawkins CPI Inflation Range 4 2 Federal Reserve Bank of Philadelphia CPI Inflation University of Michigan 0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 The shaded region shows the Humphrey-Hawkins CPI inflation range. Beginning in January 2000, the Humphrey-Hawkins inflation range was reported using the PCE price index and therefore is not shown on this graph. See notes on page 19. Treasury Security Yield Spreads Yield to maturity 6 4 10-Year less 3-Month T-Bill 2 0 3-Year less 3-Month T-Bill 10-Year less 3-Year Note -2 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Real Interest Rates Percent, Real rate = Nominal rate less CPI inflation 8 6 1-Year Treasury Yield 4 2 Federal Funds Rate 0 -2 -4 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Research Division 8 Federal Reserve Bank of St. Louis updated through 04/05/05 Monetary Trends Short-Term Interest Rates Percent 14 90-Day Commercial Paper 12 10 8 Prime Rate 6 4 3-Month Treasury Yield 2 0 88 1988 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Long-Term Interest Rates Percent 13 11 Conventional Mortgage 9 7 5 Corporate Aaa 10-Year Treasury Yield 3 88 1988 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 Long-Term Interest Rates Short-Term Interest Rates Percent Percent 9 2003 03 2004 04 2005 05 2006 4 8 3 Corporate Baa 7 6 90-Day Commercial Paper 2 5 1 3-Month Treasury Yield 4 10-Year Treasury Yield 3 2002 2002 2003 2003 2004 2004 0 2005 2005 2006 2002 2002 2003 2003 2004 2004 2005 2005 2006 FOMC Intended Federal Funds Rate, Discount Rate, and Primary Credit Rate Percent 12 10 8 Intended Federal Funds Rate 6 Discount Rate Primary Credit Rate 4 2 0 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Research Division Federal Reserve Bank of St. Louis 9 updated through 04/18/05 Monetary Trends Federal Funds Rate and Inflation Targets Percent 12 4% 3% 2% 1% 0% Target Inflation Rates 9 Actual 6 3 0 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 Calculated federal funds rate is based on Taylor's rule. See notes on page 19. Components of Taylor's Rule Actual and Potential Real GDP PCE Inflation Billions of chain-weighted 2000 dollars Percent change from year ago 11500 6 11000 5 10500 4 10000 Actual 9500 3 9000 2 Potential 8500 1 8000 7500 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Monetary Base Growth* and Inflation Targets Percent 12 Actual 9 6 3 Target Inflation Rates 0% 1% 2% 3% 4% 0 1995 95 96 1996 1997 97 98 1998 99 1999 00 2000 01 2001 02 2002 2003 03 04 2004 05 *Modified for the effects of sweeps programs on reserve demand. Calculated base growth is based on McCallum's rule. Actual base growth is percent change from year ago. See notes on page 19. Components of McCallum's Rule Monetary Base Velocity Growth Real Output Growth Percent Percent 8 8 1-Year Moving Average 1-Year Moving Average 4 4 10-Year Moving Average 0 0 -4 4-Year Moving Average -8 -4 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03 2003 04 2004 05 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03 2003 04 2004 05 Research Division 10 Federal Reserve Bank of St. Louis updated through 04/19/05 Monetary Trends Implied One-Year Forward Rates Rates on 3-Month Eurodollar Futures Percent 8 6 Percent, daily data 3.6 Week Ending: 04/16/04 03/18/05 04/15/05 Jun 2005 3.5 3.4 3.3 4 May 2005 3.2 2 Apr 2005 3.1 0 2y 5y 3y 7y 10y 3.0 02/14 02/21 02/28 03/07 03/14 03/21 03/28 04/04 04/11 04/18 Rates on Selected Federal Funds Futures Contracts Rates on Federal Funds Futures on Selected Dates Percent, daily data Percent 3.2 3.6 03/11/2005 Jun 2005 3.1 3.0 3.4 04/15/2005 3.2 May 2005 2.9 3.0 2.8 2.8 02/11/2005 Apr 2005 2.6 2.7 02/14 02/21 02/28 03/07 03/14 03/21 03/28 04/04 04/11 04/18 Apr May Jun Jul Aug Sep Contract Month Inflation-Indexed Treasury Securities Inflation-Indexed Treasury Yield Spreads Percent, weekly data Percent, weekly data 4.0 4 3.5 3 30-Year 3.0 30-Year 2.5 2.0 2 10-Year 10-Year 1 1.5 1.0 0 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2001 2001 2002 2002 2003 2003 2004 2004 2005 Inflation-Indexed 10-Year Government Notes Inflation-Indexed 10-Year Government Yield Spreads Percent, weekly data Percent, weekly data 4 2005 2006 4 France 3 U.K. 2 U.K. 3 U.S. 2 U.S. 1 1 0 France 0 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 Research Division Federal Reserve Bank of St. Louis 11 updated through 04/18/05 Monetary Trends Velocity Nominal GDP/MZM, Nominal GDP/M2 (Ratio Scale) 3.00 2.75 MZM 2.50 2.25 M2 2.00 1.75 1.50 9862 87 10227 88 10593 89 10958 90 11323 91 11688 92 12054 93 12419 94 12784 95 13149 96 13515 97 13880 98 14245 99 14610 00 14976 01 15341 02 15706 03 16071 04 16437 Interest Rates Percent 10 8 3-Month T-Bill 6 4 M2 Own MZM Own 2 0 9862 87 10227 88 10593 89 10958 90 11323 91 11688 92 12054 93 12419 94 12784 95 13149 13515 97 13880 98 14245 99 14610 00 14976 01 15341 02 15706 03 16071 MZM Velocity and Interest Rate Spread M2 Velocity and Interest Rate Spread Ratio Scale Ratio Scale 3.50 04 16437 2.25 Velocity = Nominal GDP / M2 Velocity = Nominal GDP / MZM 96 3.00 2.50 2.00 2.00 1.75 1.50 1974Q1 to 1993Q4 1994Q1 to present 1974Q1 to 1993Q4 1994Q1 to present 1.25 1.50 0 1 2 3 4 5 6 7 8 9 10 Interest Rate Spread = 3-Month T-Bill less MZM Own Rate 11 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 Interest Rate Spread = 3-Month T-Bill less M2 Own Rate Research Division 12 Federal Reserve Bank of St. Louis updated through 04/18/05 Monetary Trends Gross Domestic Product Percent change from year ago 20 15 10 5 0 1987 87 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 Dashed lines indicate 10-year moving averages. Real Gross Domestic Product Percent change from year ago 15 10 5 0 -5 1987 87 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 Dashed lines indicate 10-year moving averages. Gross Domestic Product Price Index Percent change from year ago 20 15 10 5 0 1987 87 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 Dashed lines indicate 10-year moving averages. M2 Percent change from year ago 20 15 10 5 0 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 Dashed lines indicate 10-year moving averages. Research Division Federal Reserve Bank of St. Louis 13 updated through 04/18/05 Monetary Trends Bank Credit Percent change from year ago 20 15 10 5 0 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 Investment Securities in Bank Credit at Commercial Banks Percent change from year ago 25 20 15 10 5 0 -5 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 Total Loans and Leases in Bank Credit at Commercial Banks Percent change from year ago 20 15 10 5 0 -5 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 Commercial and Industrial Loans at Commercial Banks Percent change from year ago 20 15 10 5 0 -5 -10 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 Research Division 14 Federal Reserve Bank of St. Louis updated through 04/11/05 Monetary Trends Standard & Poor's 500 1600 48 1400 42 Composite Index (left) 1200 36 1000 30 800 24 Price/Earnings Ratio (right) 600 18 400 12 200 6 0 0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 Recent Inflation and Long-Term Interest Rates Consumer Price Inflation Rates Long-Term Government Bond Rates Percent change from year ago 2004Q1 2004Q2 2004Q3 2004Q4 Percent Jan05 Feb05 Dec04 Mar05 United States 1.82 2.84 2.69 3.37 4.23 4.22 4.17 4.50 Canada 0.87 2.18 1.99 2.29 4.33 4.26 4.20 4.37 France 1.80 2.38 2.28 2.08 3.64 3.58 3.60 . Germany 1.02 1.79 1.88 1.98 3.60 3.56 3.54 3.70 Italy Japan United Kingdom 2.29 2.33 2.23 1.98 3.79 3.71 3.68 3.84 -0.17 -0.27 -0.10 0.48 1.40 1.36 1.40 1.45 2.58 2.75 3.09 3.41 4.50 4.48 4.61 . Inflation and Long-Term Interest Rate Differentials Percent Percent 3 3 Canada U.K. Canada 0 0 Germany U.K. Japan Germany -3 -3 Japan Inflation differential = Foreign inflation less U.S. inflation Long-term rate differential = Foreign rate less U.S. rate -6 01/01/2002 -6 2002 01/01/2003 2003 01/01/2004 2004 01/01/2005 2005 01/01/2006 01/01/2002 2002 01/01/2003 2003 01/01/2004 2004 01/01/2005 2005 01/01/2006 Research Division Federal Reserve Bank of St. Louis 15 updated through 04/18/05 Monetary Trends Money Stock Bank Adjusted M1 MZM M2 M3 Credit Monetary Base 2000. 2001. 1103.482 4508.932 4801.002 6861.391 5025.431 1136.938 5221.307 5218.620 7643.640 5345.142 2002. 2003. 1192.032 5892.156 5613.534 8257.680 5597.000 1268.505 6328.391 6003.106 8786.362 2004. 1338.512 6575.974 6275.505 9245.466 Reserves MSI M2 607.106 84.511 242.147 641.167 85.923 263.698 697.072 87.914 285.675 6120.006 740.762 92.915 305.983 6591.153 776.518 95.578 320.439 2003 1 1231.793 6193.410 5866.583 8621.050 5955.552 726.828 90.855 299.028 . 2 1262.199 6275.435 5974.514 8731.063 6135.745 738.281 91.807 304.467 . 3 1286.174 6438.678 6088.880 8899.502 6186.073 744.144 94.732 310.284 . 4 1293.854 6406.044 6082.447 8893.835 6202.655 753.796 94.266 310.153 2004 1 1313.176 6443.963 6135.538 9015.656 6424.644 761.243 94.542 313.056 . 2 1332.790 6582.490 6255.537 9227.488 6554.143 770.962 96.125 319.294 . 3 1344.775 6616.481 6310.761 9326.095 6647.099 782.591 96.310 322.317 . 4 1363.307 6660.960 6400.185 9412.625 6738.728 791.277 95.334 327.087 2005 1 1364.846 6663.574 6457.597 9512.784 6933.320 798.072 96.164 329.997 2003 Mar 1238.319 6207.168 5889.425 8644.586 6008.285 732.286 91.291 300.204 . Apr 1244.962 6229.976 5924.733 8675.075 6048.562 736.490 92.281 301.995 . May 1265.697 6272.272 5978.844 8732.167 6152.622 738.676 91.440 304.658 . Jun 1275.938 6324.056 6019.965 8785.946 6206.051 739.676 91.700 306.747 . 1279.812 6420.039 6064.290 8878.770 6194.447 741.389 93.633 309.027 . Jul Aug 1289.179 6449.851 6110.288 8911.334 6179.171 745.394 95.535 311.333 . Sep 1289.532 6446.143 6092.063 8908.401 6184.600 745.648 95.029 310.492 . Oct 1290.433 6422.121 6084.259 8904.944 6160.839 753.833 95.387 310.163 . Nov 1291.913 6403.039 6079.700 8887.332 6197.354 754.786 94.912 310.017 . Dec 1299.217 6392.972 6083.381 8889.229 6249.773 752.769 92.500 310.280 2004 Jan 1297.033 6406.283 6096.437 8947.387 6319.328 756.606 92.731 311.118 . Feb 1314.962 6438.460 6135.755 9011.571 6438.835 763.012 95.437 313.058 . Mar 1327.532 6487.145 6174.423 9088.011 6515.769 764.112 95.458 314.993 . Apr 1327.878 6535.526 6212.369 9154.269 6535.316 767.768 96.609 317.022 . May 1331.757 6600.424 6270.999 9243.835 6543.913 770.029 95.311 320.102 . Jun 1338.736 6611.520 6283.242 9284.359 6583.200 775.088 96.455 320.759 . Jul Aug 1331.351 6598.333 6285.147 9288.370 6602.738 780.276 95.214 321.083 . 1349.213 6611.946 6306.075 9320.768 6634.586 781.339 95.540 322.022 . Sep 1353.760 6639.165 6341.060 9369.147 6703.973 786.158 98.176 323.846 . Oct 1353.809 6638.325 6367.645 9377.558 6705.026 792.055 97.051 325.372 . Nov 1368.804 6662.657 6404.532 9406.945 6743.241 793.690 96.344 327.320 . Dec 1367.308 6681.898 6428.378 9453.372 6767.916 788.085 92.606 328.569 2005 Jan 1357.720 6673.720 6441.861 9493.530 6836.902 793.357 94.614 329.312 . Feb 1365.015 6657.928 6455.681 9512.030 6940.769 800.094 97.335 329.878 . Mar 1371.802 6659.075 6475.249 9532.792 7022.288 800.765 96.544 330.800 *All values are given in billions of dollars. Research Division 16 Federal Reserve Bank of St. Louis updated through 04/18/05 Monetary Trends Federal Primary Prime 3-mo Funds Credit Rate Rate CDs 3-mo Treasury Yields 3-yr 10-yr Corporate S&L Aaa Bonds Aaa Bonds Conventional Mortgage 2000. 2001. 2002. 2003. 2004. 6.24 3.89 1.67 1.13 1.35 . . . 2.11 2.34 9.23 6.92 4.68 4.12 4.34 6.46 3.69 1.73 1.15 1.56 6.00 3.47 1.63 1.03 1.40 6.22 4.08 3.10 2.11 2.78 6.03 5.02 4.61 4.02 4.27 7.62 7.08 6.49 5.67 5.63 5.58 5.01 4.87 4.52 4.50 8.06 6.97 6.54 5.82 5.84 1 2 3 4 1.25 1.25 1.02 1.00 2.25 2.23 2.00 2.00 4.25 4.24 4.00 4.00 1.26 1.17 1.07 1.10 1.18 1.06 0.95 0.93 2.07 1.77 2.20 2.38 3.92 3.62 4.23 4.29 6.00 5.31 5.70 5.66 4.60 4.28 4.68 4.52 5.83 5.51 6.01 5.92 . . . 1 2 3 4 1.00 1.01 1.43 1.95 2.00 2.00 2.42 2.94 4.00 4.00 4.42 4.94 1.05 1.25 1.70 2.25 0.93 1.10 1.51 2.04 2.17 2.98 2.92 3.05 4.02 4.60 4.30 4.17 5.45 5.93 5.64 5.48 4.26 4.82 4.54 4.39 5.61 6.13 5.89 5.73 2005 1 2.47 3.44 5.44 2.78 2.58 3.61 4.30 5.32 4.23 5.76 2003 Mar 1.25 2.25 4.25 1.23 1.15 1.98 3.81 5.89 4.51 5.75 . . . Apr May Jun 1.26 1.26 1.22 2.25 2.25 2.20 4.25 4.25 4.22 1.24 1.22 1.04 1.15 1.09 0.94 2.06 1.75 1.51 3.96 3.57 3.33 5.74 5.22 4.97 4.60 4.16 4.07 5.81 5.48 5.23 . . . Jul Aug Sep 1.01 1.03 1.01 2.00 2.00 2.00 4.00 4.00 4.00 1.05 1.08 1.08 0.92 0.97 0.96 1.93 2.44 2.23 3.98 4.45 4.27 5.49 5.88 5.72 4.59 4.82 4.63 5.63 6.26 6.15 . . . Oct Nov Dec 1.01 1.00 0.98 2.00 2.00 2.00 4.00 4.00 4.00 1.10 1.11 1.10 0.94 0.95 0.91 2.26 2.45 2.44 4.29 4.30 4.27 5.70 5.65 5.62 4.64 4.50 4.41 5.95 5.93 5.88 2004 Jan . Feb Mar . 1.00 1.01 1.00 2.00 2.00 2.00 4.00 4.00 4.00 1.06 1.05 1.05 0.90 0.94 0.95 2.27 2.25 2.00 4.15 4.08 3.83 5.54 5.50 5.33 4.42 4.26 4.11 5.74 5.64 5.45 . . . Apr May Jun 1.00 1.00 1.03 2.00 2.00 2.01 4.00 4.00 4.01 1.08 1.20 1.46 0.96 1.04 1.29 2.57 3.10 3.26 4.35 4.72 4.73 5.73 6.04 6.01 4.69 4.93 4.85 5.83 6.27 6.29 . . . Jul Aug Sep 1.26 1.43 1.61 2.25 2.43 2.58 4.25 4.43 4.58 1.57 1.68 1.86 1.36 1.50 1.68 3.05 2.88 2.83 4.50 4.28 4.13 5.82 5.65 5.46 4.71 4.52 4.40 6.06 5.87 5.75 . . . Oct Nov Dec 1.76 1.93 2.16 2.75 2.93 3.15 4.75 4.93 5.15 2.04 2.26 2.45 1.79 2.11 2.22 2.85 3.09 3.21 4.10 4.19 4.23 5.47 5.52 5.47 4.38 4.45 4.35 5.72 5.73 5.75 2005 Jan . Feb Mar . 2.28 2.50 2.63 3.25 3.49 3.58 5.25 5.49 5.58 2.61 2.77 2.97 2.37 2.58 2.80 3.39 3.54 3.91 4.22 4.17 4.50 5.36 5.20 5.40 4.24 4.16 4.29 5.71 5.63 5.93 2003 . . . 2004 *All values are given as a percent at an annual rate. Research Division Federal Reserve Bank of St. Louis 17 updated through 04/18/05 Monetary Trends M1 MZM M2 M3 Percent change at an annual rate 2000. 2001. 2002. 2003. 2004. 0.18 3.03 4.85 6.42 5.52 8.12 15.80 12.85 7.40 3.91 6.09 8.70 7.57 6.94 4.54 9.43 11.40 8.03 6.40 5.23 1 2 3 4 7.95 9.87 7.60 2.39 7.76 5.30 10.41 -2.03 6.84 7.36 7.66 -0.42 6.59 5.10 7.72 -0.25 . . . 1 2 3 4 5.97 5.97 3.60 5.51 2.37 8.60 2.07 2.69 3.49 7.82 3.53 5.67 5.48 9.40 4.27 3.71 2005 1 0.45 0.16 3.59 4.26 2003 Mar 2.42 1.09 3.31 2.37 . . . Apr May Jun 6.44 19.99 9.71 4.41 8.15 9.91 7.19 10.96 8.25 4.23 7.90 7.39 . . . Jul Aug Sep 3.64 8.78 0.33 18.21 5.57 -0.69 8.84 9.10 -3.58 12.68 4.40 -0.39 . . . Oct Nov Dec 0.84 1.38 6.78 -4.47 -3.57 -1.89 -1.54 -0.90 0.73 -0.47 -2.37 0.26 2004 Jan . Feb Mar . -2.02 16.59 11.47 2.50 6.03 9.07 2.58 7.74 7.56 7.85 8.61 10.18 . . . Apr May Jun 0.31 3.51 6.29 8.95 11.92 2.02 7.37 11.33 2.34 8.75 11.74 5.26 . . . Jul Aug Sep -6.62 16.10 4.04 -2.39 2.48 4.94 0.36 4.00 6.66 0.52 4.19 6.23 . . . Oct Nov Dec 0.04 13.29 -1.31 -0.15 4.40 3.47 5.03 6.95 4.47 1.08 3.76 5.92 2005 Jan . Feb Mar . -8.41 6.45 5.97 -1.47 -2.84 0.21 2.52 2.57 3.64 5.10 2.34 2.62 2003 . . . 2004 Research Division 18 Federal Reserve Bank of St. Louis Monetary Trends Definitions M1: The sum of currency held outside the vaults of depository institutions, Federal Reserve Banks, and the U.S. Treasury; travelers checks; and demand and other checkable deposits issued by financial institutions (except demand deposits due to the Treasury and depository institutions), minus cash items in process of collection and Federal Reserve float. MZM (money, zero maturity): M2 minus small-denomination time deposits, plus institutional money market mutual funds (that is, those included in M3 but excluded from M2). The label MZM was coined by William Poole (1991); the aggregate itself was proposed earlier by Motley (1988). M2: M1 plus savings deposits (including money market deposit accounts) and small-denomination (under $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments under $50,000), net of retirement accounts. M3: M2 plus large-denomination ($100,000 or more) time deposits; repurchase agreements issued by depository institutions; Eurodollar deposits, specifically, dollar-denominated deposits due to nonbank U.S. addresses held at foreign offices of U.S. banks worldwide and all banking offices in Canada and the United Kingdom; and institutional money market mutual funds (funds with initial investments of $50,000 or more). Bank Credit: All loans, leases, and securities held by commercial banks. Domestic Nonfinancial Debt: Total credit market liabilities of the U.S. Treasury, federally sponsored agencies, state and local governments, households, and nonfinancial firms. End-of-period basis. Adjusted Monetary Base: The sum of currency in circulation outside Federal Reserve Banks and the U.S. Treasury, deposits of depository financial institutions at Federal Reserve Banks, and an adjustment for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories. This series is a spliced chain index; see Anderson and Rasche (1996a,b, 2001, 2003). Adjusted Reserves: The sum of vault cash and Federal Reserve Bank deposits held by depository institutions and an adjustment for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories. This spliced chain index is numerically larger than the Board of Governors’ measure, which excludes vault cash not used to satisfy statutory reserve requirements and Federal Reserve Bank deposits used to satisfy required clearing balance contracts; see Anderson and Rasche (1996a, 2001, 2003). Monetary Services Index: An index that measures the flow of monetary services received by households and firms from their holdings of liquid assets; see Anderson, Jones, and Nesmith (1997). Indexes are shown for the assets included in M2, with additional data at research.stlouisfed.org/msi/index.html. Note: M1, M2, M3, Bank Credit, and Domestic Nonfinancial Debt are constructed and published by the Board of Governors of the Federal Reserve System. For details, see Statistical Supplement to the Federal Reserve Bulletin, tables 1.21 and 1.26. MZM, Adjusted Monetary Base, Adjusted Reserves, and Monetary Services Index are constructed and published by the Research Division of the Federal Reserve Bank of St. Louis. Notes Page 3: Readers are cautioned that, since early 1994, the level and growth of M1 have been depressed by retail sweep programs that reclassify transactions deposits (demand deposits and other checkable deposits) as savings deposits overnight, thereby reducing banks’ required reserves; see Anderson and Rasche (2001) and research.stlouisfed.org/aggreg/swdata.html. Primary Credit Rate, Discount Rate, and Intended Federal Funds Rate shown in the chart Reserve Market Rates are plotted as of the date of the change, while the Effective Federal Funds Rate is plotted as of the end of the month. Interest rates in the table are monthly averages from the Board of Governors H.15 Statistical Release. The Treasury Yield Curve shows constant maturity yields calculated by the U.S. Treasury for securities with 3 months and 1, 2, 3, 5, 7, and 10 years to maturity. Daily data and descriptions are available at research.stlouisfed.org/fred2/. See Research Division Federal Reserve Bank of St. Louis also Statistical Supplement to the Federal Reserve Bulletin, table 1.35. The 30-year constant maturity series was discontinued by the Treasury as of February 18, 2002. Page 5: Checkable Deposits is the sum of demand and other checkable deposits. Savings Deposits is the sum of money market deposit accounts and passbook and statement savings. Time Deposits have a minimum initial maturity of 7 days. Large Time Deposits are deposits of $100,000 or more. Retail and Institutional Money Market Mutual Funds are as included in M2 and the non-M2 component of M3, respectively. Page 7: Excess Reserves plus RCB (Required Clearing Balance) Contracts equals the amount of deposits at Federal Reserve Banks held by depository institutions but not applied to satisfy statutory reserve requirements. (This measure excludes the vault cash held by depository institutions that is not applied to satisfy statutory reserve requirements.) Consumer Credit includes most short- and intermediate-term credit extended to individuals. See Statistical Supplement to the Federal Reserve Bulletin, table 1.55. Page 8: Inflation Expectations measures include the quarterly Federal Reserve Bank of Philadelphia Survey of Professional Forecasters, the monthly University of Michigan Survey Research Center’s Surveys of Consumers, and the annual Federal Open Market Committee (FOMC) range as reported to the Congress in the February testimony that accompanies the Monetary Policy Report to the Congress. Beginning February 2000, the FOMC began using the personal consumption expenditures (PCE) price index to report its inflation range; the FOMC then switched to the PCE chain-type price index excluding food and energy prices (“core”) beginning July 2004. Accordingly, neither are shown on this graph. CPI Inflation is the percentage change from a year ago in the consumer price index for all urban consumers. Real Interest Rates are ex post measures, equal to nominal rates minus CPI inflation. Page 9: FOMC Intended Federal Funds Rate is the level (or midpoint of the range, if applicable) of the federal funds rate that the staff of the FOMC expected to be consistent with the desired degree of pressure on bank reserve positions. In recent years, the FOMC has set an explicit target for the federal funds rate. Page 10: Federal Funds Rate and Inflation Targets shows the observed federal funds rate, quarterly, and the level of the funds rate implied by applying Taylor’s (1993) equation ft*= 2.5 + π t –1 + (π t –1 – π* )/2 + 100 × (yt –1 – yt –1P )/2 to five alternative target inflation rates, π* = 0, 1, 2, 3, 4 percent, where ft* is the implied federal funds rate, π t –1 is the previous period’s inflation rate (PCE) measured on a year-over-year basis, yt –1 is the log of the previous period’s level of real gross domestic product (GDP), and yt –1P is the log of an estimate of the previous period’s level of potential output. Potential Real GDP is as estimated by the Congressional Budget Office. Monetary Base Growth and Inflation Targets shows the quarterly growth of the adjusted monetary base (modified to include an estimate of the effect of sweep programs) implied by applying McCallum’s (1988, 1993) equation ΔMBt* = π* + (10-year moving average growth of real GDP) – (4-year moving average of base velocity growth) to five alternative target inflation rates, π* = 0, 1, 2, 3, 4 percent, where ΔMBt* is the implied growth rate of the adjusted monetary base. The 10-year moving average growth of real GDP for a quarter t is calculated as the average quarterly growth during the previous 40 quarters, at an annual rate, by the formula ((yt – yt –40 )/40) × 400, where yt is the log of real GDP. The 4-year moving average of base velocity growth is calculated similarly. To adjust the monetary base for the effect of retail-deposit sweep programs, we add to the monetary base an amount equal to 10 percent of the total amount swept, as estimated by the Federal Reserve Board staff. These estimates are imprecise, at best. Sweep program data are found at research.stlouisfed.org/aggreg/swdata.html. Page 11: Implied One-Year Forward Rates are calculated by this Bank from Treasury constant maturity yields. Yields to maturity, R(m), for securities with m = 1,..., 10 years to maturity are obtained by linear interpolation between 19 Monetary Trends reported yields. These yields are smoothed by fitting the regression suggested by Nelson and Siegel (1987), R(m) = a0 + (a1 + a2 )(1 – e–m/50 )/(m/50) – a2 × e–m/50, and forward rates are calculated from these smoothed yields using equation (a) in table 13.1 of Shiller (1990), f(m) = [D(m)R(m) – D(m–1)] / [D(m) – D(m–1)], where duration is approximated as D(m) = (1 – e –R(m) × m)/R(m). These rates are linear approximations to the true instantaneous forward rates; see Shiller (1990). For a discussion of the use of forward rates as indicators of inflation expectations, see Sharpe (1997). Rates on 3-Month Eurodollar Futures and Rates on Selected Federal Funds Futures Contracts trace through time the yield on three specific contracts. Rates on Federal Funds Futures on Selected Dates displays a single day’s snapshot of yields for contracts expiring in the months shown on the horizontal axis. Inflation-Indexed Treasury Securities are yields on the most recently issued inflation-indexed securities of 10- and 30-year original maturities. Inflation-Indexed 10-Year Government Notes shows the yield of an inflation-indexed note that is scheduled to mature in approximately (but not greater than) 10 years. The current French note has a maturity date of 7/25/2013, the current U.K. note has a maturity date of 8/16/2013, and the current U.S. note has a maturity date of 1/15/2015. InflationIndexed Treasury Yield Spreads and Inflation-Indexed 10-Year Government Yield Spreads equal the difference between the yields on the most recently issued inflation-indexed securities and the unadjusted security yields of similar maturity. Page 12: Velocity (for MZM and M2) equals the ratio of GDP, measured in current dollars, to the level of the monetary aggregate. MZM and M2 Own Rates are weighted averages of the rates received by households and firms on the assets included in the aggregates. Prior to 1982, the 3-month T-bill rates are secondary market yields. From 1982 forward, rates are 3-month constant maturity yields. Page 13: Real Gross Domestic Product is GDP as measured in chained 2000 dollars. The Gross Domestic Product Price Index is the implicit price deflator for GDP, which is defined by the Bureau of Economic Analysis, U.S. Department of Commerce, as the ratio of GDP measured in current dollars to GDP measured in chained 2000 dollars. Federal Reserve Bank of Philadelphia : Survey of Professional Forecasters inflation expectations. Federal Reserve Bank of St. Louis : Adjusted monetary base and adjusted reserves, monetary services index, MZM own rate, one-year forward rates. Organization for Economic Cooperation and Development : International interest and inflation rates. Standard & Poor’s : Stock price-earnings ratio, stock price composite index. University of Michigan Survey Research Center : Median expected price change. U.S. Department of the Treasury : U.S. security yields. References Anderson, Richard G. and Robert H. Rasche (1996a). “A Revised Measure of the St. Louis Adjusted Monetary Base,” Federal Reserve Bank of St. Louis Review, March/April, 78(2), pp. 3-13.* ____ and ____(1996b). “Measuring the Adjusted Monetary Base in an Era of Financial Change,” Federal Reserve Bank of St. Louis Review, November/ December, 78(6), pp. 3-37.* ____ and ____(2001). “Retail Sweep Programs and Bank Reserves, 19941999,” Federal Reserve Bank of St. Louis Review, January/February, 83(1), pp. 51-72.* ____ and ____ , with Jeffrey Loesel (2003). “A Reconstruction of the Federal Reserve Bank of St. Louis Adjusted Monetary Base and Reserves,” Federal Reserve Bank of St. Louis Review, September/October, 85(5), pp. 39-70.* ____ , Barry E. Jones and Travis D. Nesmith (1997). “Special Report: The Monetary Services Indexes Project of the Federal Reserve Bank of St. Louis,” Federal Reserve Bank of St. Louis Review, January/February, 79(1), pp. 31-82.* McCallum, Bennett T. (1988). “Robustness Properties of a Monetary Policy Rule,” Carnegie-Rochester Conference Series on Public Policy, vol. 29, pp. 173-204. Page 14: Investment Securities are all securities held by commercial banks in both investment and trading accounts. ____(1993). “Specification and Analysis of a Monetary Policy Rule for Japan,” Bank of Japan Monetary and Economic Studies, November, pp. 1-45. Page 15: Inflation Rate Differentials are the differences between the foreign consumer price inflation rates and year-over-year changes in the U.S. all-items Consumer Price Index. Motley, Brian (1988). “Should M2 Be Redefined?” Federal Reserve Bank of San Francisco Economic Review, Winter, pp. 33-51. Page 17: Treasury Yields are Treasury constant maturities as reported in the Board of Governors of the Federal Reserve System’s H.15 release. Sources Agence France Trésor: French note yields. Bank of Canada: Canadian note yields. Bank of England : U.K. note yields. Board of Governors of the Federal Reserve System : Monetary aggregates and components: H.6 release. Bank credit and components: H.8 release. Consumer credit: G.19 release. Required reserves, excess reserves, clearing balance contracts, and discount window borrowing: H.4.1 and H.3 releases. Interest rates: H.15 release. Nonfinancial commercial paper: Board of Governors website. Nonfinancial debt: Z.1 release. M2 own rate. Nelson, Charles R. and Andrew F. Siegel (1987). “Parsimonious Modeling of Yield Curves,” Journal of Business, October, pp. 473-89. Poole, William (1991). Statement before the Subcommittee on Domestic Monetary Policy of the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives, November 6, 1991. Government Printing Office, Serial No. 102-82. Sharpe, William F. (1997). Macro-Investment Analysis, on-line textbook available at www.stanford.edu/~wfsharpe/mia/mia.htm. Shiller, Robert (1990). “The Term Structure of Interest Rates,” Handbook of Monetary Economics, vol. 1, B. Friedman and F. Hahn, eds., pp. 627-722. Taylor, John B. (1993). “Discretion versus Policy Rules in Practice,” CarnegieRochester Conference Series on Public Policy, vol. 39, pp. 195-214. Note: *Available on the Internet at research.stlouisfed.org/publications/review/. Bureau of Economic Analysis : GDP. Bureau of Labor Statistics : CPI. Chicago Board of Trade: Federal funds futures contract. Chicago Mercantile Exchange : Eurodollar futures. Congressional Budget Office : Potential real GDP. 20 Research Division Federal Reserve Bank of St. Louis