Full text of Monetary Trends : September 2003
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MonetaryTrends September 2003 —R. Alton Gilbert 1 Measures of bank performance each quarter by bank size and Census division are available from this Bank at http://research.stlouisfed.org/fred2/categories/83. Percent of Nonperforming C&I Loans (≤$300M in assets) 12 10 8 6 4 2 M ar M 88 ar M 89 ar -9 M 0 ar M -91 ar M 92 ar M -93 ar M 94 ar -9 M 5 ar M -96 ar M 97 ar M 98 ar -9 M 9 ar M 00 ar M -01 ar M 02 ar -0 3 0 Percent Annual U.S. Growth Rate of Nonfarm Employment 8 6 4 2 19 –2 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 0 88 T he quality of U.S. bank assets varied during the late 1980s and early 1990s. At various times during this period the average asset quality of banks in New England, the Southwest, and California was unusually poor relative to that of banks in other parts of the nation. Since the asset quality problems of banks in these three regions peaked at different times, differences in measures of asset quality across regions remained large for an extended period. I compare the recent range of differences in asset quality across regions (during the recent recession and current economic expansion) with comparable data for the late 1980s and early 1990s. The measure of asset quality shown here is the percentage of commercial and industrial (C&I) loans that are nonperforming (past due _> 90 days or classified as nonaccrual). This measure of asset quality for community banks (often identified as banks with total assets less than $1 billion) is more likely to reflect the economic conditions in the Census divisions of their headquarters than would the nonperforming loan ratios of very large banks with offices located in several regions. In the top chart the shaded area is the range of the average nonperforming C&I loan ratios for relatively small community banks (total assets < $300 million) across the nine Census divisions (groups of contiguous states) since 1988; the solid line is the average nonperforming C&I loan ratio for these relatively small community banks. The decline in this line indicates that the average nonperforming loan ratio at these banks was higher during the late 1980s and early 1990s than during the recent recession and current economic expansion. The range of the average nonperforming C&I loan ratio across the Census divisions shrank substantially during the second half of the 1990s and did not widen during the recession of 2001 or the following economic expansion. The patterns are similar for the nonperforming C&I loan rate for banks with total assets between $300 million and $1 billion and for the nonperforming rate on total loans for community banks in each of the two size groups (above and below $300 million, not shown). Regional differences in asset quality have been very small during recent quarters relative to the size of the differences in the late 1980s and early 1990s.1 Differences in the pace of economic activity across regions of the nation began declining during the 1990s, which may explain the narrowing of the range of bank asset quality across regions since the mid-1990s. The bottom chart shows the range of growth rates of nonfarm employment across the nine Census divisions; the solid line is the national growth rate of employment, and the shaded area is the range of growth rates across Census divisions. The range of the growth rates of employment narrowed substantially around 1997. The average range of growth rates across Census divisions was 4.5 percentage points for 1988-96, compared with 2 percentage points for 1997-2002. 19 Regional Patterns in the Quality of Bank Assets –4 –6 SOURCE: Top: Call Report Data, available from the FRB St. Louis at web address in footnote 1. Bottom: Bureau of Labor Statistics, available at http://www.bls.gov/sae/home.htm. Views expressed do not necessarily reflect official positions of the Federal Reserve System. Available on the web at 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. Except where otherwise noted, solid shading indicates recessions, as determined by the National Bureau of Economic Research. The NBER has not yet determined the end of the recession that began in March 2001; however, the hatched shading indicates this recession ended in November 2001, as determined by a statistical model for dating business cycle turning points developed by Marcelle Chauvet (“An Econometric Characterization of Business Cycle Dynamics with Factor Structure and Regime Switching,” International Economic Review, November 1998, pp. 969-96) and discussed by Marcelle Chauvet and Jeremy Piger (“Identifying Business Cycle Turning Points in Real Time,” Federal Reserve Bank of St. Louis Review, March/April 2003, pp. 47-62). 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. Single-copy subscriptions are available free of charge by writing to the Public Affairs Department, Federal Reserve Bank of St. Louis, P.O. Box 442, St. Louis, MO 63166-0442 or by calling (314) 444-8809. Subscription forms may also be completed online at research.stlouisfed.org/order/pubform.php. For more information on data in this publication, please visit research.stlouisfed.org/fred2 or call (314) 444-8590. The entire publication is also available on the Internet at research.stlouisfed.org/publications/mt. updated through 08/18/03 Monetary Trends Reserve Market Rates M2 and MZM Billions of dollars Percent 6650 7.00 Effective Federal Funds Rate Intended Federal Funds Rate 6.50 6400 6.00 6150 5.50 5900 5.00 4.50 5650 M2 4.00 5400 3.50 5150 3.00 4900 2.50 Primary Credit Rate Discount Rate 2.00 4650 1.50 MZM 4400 1.00 4150 0.50 2000 2000 2001 2001 2002 2002 2003 2003 2004 Adjusted Monetary Base 2000 2000 2001 2001 2002 2002 2003 2003 2004 Treasury Yield Curve Percent change at an annual rate Percent 50 6.0 40 5.5 5.0 30 Week Ending: 08/16/02 07/18/03 08/15/03 4.5 20 4.0 10 3.5 0 3.0 2.5 -10 2.0 -20 1.5 -30 1.0 -40 0.5 2000 2000 2001 2001 2002 2002 2003 2003 3m 1y 2y 3y 5y 7y 10y 2004 Total Bank Credit Interest Rates May 03 Jun 03 Jul 03 Federal Funds Rate 1.26 1.22 1.01 Prime Rate 4.25 4.22 4.00 Primary Credit Rate 2.25 2.20 2.00 Conventional Mortgage Rate 5.48 5.23 Percent change at an annual rate 50 40 30 . Treasury Yields Treasury Yields: 20 10 0 . . 5.63 . . . 3-Month Constant Maturity 1.09 0.94 0.92 6-Month Constant Maturity 1.11 0.94 0.97 1-Year Constant Maturity 1.18 1.01 1.12 3-Year Constant Maturity 1.75 1.51 1.93 5-Year Constant Maturity 2.52 2.27 2.87 10-Year Constant Maturity 3.57 3.33 3.98 -10 2000 2000 2001 2001 2002 2002 2003 2003 2004 Research Division Federal Reserve Bank of St. Louis 3 updated through 08/18/03 Monetary Trends MZM and M1 Percent change from year ago 25 20 15 10 MZM 5 0 M1 -5 -10 1986 86 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 M2 Percent change from year ago 15 10 5 0 -5 1986 86 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 M3 Percent change from year ago 15 10 5 0 -5 1986 86 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 Monetary Services Index - M2 Percent change from year ago 15 10 5 0 -5 86 1986 87 1987 88 1988 89 1989 90 1990 91 1991 92 1992 93 1993 94 1994 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03 2003 2004 Research Division 4 Federal Reserve Bank of St. Louis updated through 08/18/03 Monetary Trends Adjusted Monetary Base Percent change from year ago 20 15 10 5 0 -5 1986 86 1987 87 1988 88 1989 89 1990 90 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 98 1998 1999 99 00 2000 2001 01 2002 02 2003 Domestic Nonfinancial Debt Currency Held by the Nonbank Public Percent change from year ago Percent change from year ago 03 2004 15 15 10 Total 10 5 0 5 Federal -5 -10 0 1996 1996 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999 2000 2001 2002 2003 2004 2000 2000 2001 2001 2002 2002 2003 Time Deposits Checkable and Savings Deposits Percent change from year ago Percent change from year ago 30 2003 2004 30 25 25 Large Denomination 20 20 15 15 10 10 5 5 0 0 -5 -5 Small Denomination -10 Savings -10 -15 Checkable -15 2000 2000 2001 2001 2002 2002 2003 2003 2004 Money Market Mutual Fund Shares 2000 2000 2001 2001 2002 2002 2003 2004 Repurchase Agreements and Eurodollars Percent change from year ago Billions of dollars 60 50 Institutional Funds 40 2003 Billions of dollars 550 400 500 350 450 300 30 Repos (left) 400 250 20 350 10 Retail Funds 200 Eurodollars (right) 300 0 -10 150 250 2000 2000 2001 2001 2002 2002 2003 2003 100 2000 2001 2002 2003 2004 Research Division Federal Reserve Bank of St. Louis 5 updated through 08/18/03 Monetary Trends M1 Percent change at an annual rate 80 60 40 20 0 -20 -40 -60 1986 86 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 MZM Percent change at an annual rate 40 30 20 10 0 -10 -20 1986 86 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 M2 Percent change at an annual rate 40 30 20 10 0 -10 1986 86 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 M3 Percent change at an annual rate 40 30 20 10 0 -10 86 1986 87 1987 88 1988 89 1989 90 1990 91 1991 92 1992 93 1993 94 1994 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03 2003 2004 Research Division 6 Federal Reserve Bank of St. Louis updated through 08/18/03 Monetary Trends Adjusted and Required Reserves Billions of dollars 120 100 Adjusted 80 60 Required 40 20 0 1986 86 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 Total Borrowings, nsa Excess Reserves plus RCB Contracts Billions of dollars Billions of dollars 3.5 28 3.0 24 2.5 03 2004 20 2.0 16 1.5 12 1.0 8 0.5 0.0 4 1996 1996 1997 1998 1999 2000 2001 2002 2003 1997 1998 1999 2000 2001 2002 2003 2004 1996 1997 1998 1999 2000 2001 2002 2003 1996 1997 1998 1999 2000 2001 2002 2003 2004 Nonfinancial Commercial Paper Percent change from year ago 60 40 20 0 -20 -40 1986 86 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 Consumer Credit Percent change from year ago 20 15 10 5 0 -5 -10 86 1986 87 1987 88 1988 89 1989 90 1990 91 1991 92 1992 93 1993 94 1994 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03 2003 2004 Research Division Federal Reserve Bank of St. Louis 7 updated through 08/18/03 Monetary Trends Inflation and Inflation Expectations Percent 10 8 6 Federal Reserve Bank of Philadelphia Humphrey-Hawkins CPI Inflation Range 4 University of Michigan 2 CPI Inflation 0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 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 10-Year less 3-Month T-Bill 4 2 0 10-Year less 3-Year T-Bill 3-Year less 3-Month T-Bill -2 1986 86 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 Real Interest Rates Percent, Real rate = Nominal rate less CPI inflation 8 6 1-Year Treasury Yield 4 2 Federal Funds Rate 0 -2 86 1986 87 1987 88 1988 89 1989 90 1990 91 1991 92 1992 93 1993 94 1994 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03 2003 2004 Research Division 8 Federal Reserve Bank of St. Louis updated through 08/05/03 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 1986 86 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 02 2002 2003 03 2004 Long-Term Interest Rates Percent 13 Conventional Mortgage 11 9 7 Corporate Aaa 5 10-Year Treasury Yield 3 1986 86 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 Long-Term Interest Rates Short-Term Interest Rates Percent Percent 9 2001 01 02 2002 2003 03 2004 9 8 8 90-Day Commercial Paper 7 Corporate Baa 7 6 5 6 3-Month Treasury Yield 4 5 3 10-Year Treasury Yield 2 4 1 3 0 2000 2000 2001 2001 2002 2002 2003 2003 2004 2000 2000 2001 2001 2002 2002 2003 2003 2004 FOMC Intended Federal Funds Rate, Discount Rate, and Primary Credit Rate Percent 12 10 Intended Federal Funds Rate 8 6 Discount Rate Primary Credit Rate 4 2 0 86 1986 87 1987 88 1988 89 1989 90 1990 91 1991 92 1992 93 1993 94 1994 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03 2003 2004 Research Division Federal Reserve Bank of St. Louis 9 updated through 08/18/03 Monetary Trends Federal Funds Rate and Inflation Targets Percent 12 4% 3% 2% 1% 0% Target Inflation Rates 9 Actual 6 3 0 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 Calculated federal funds rate is based on Taylor’s rule. See notes on page 19. 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 Components of Taylor’s Rule Actual and Potential Real GDP PCE Inflation and Projections Percent change from year ago Billions of chain-weighted 1996 dollars 10000 6 9500 5 Actual 9000 4 8500 3 Potential 8000 2 7500 1 7000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 The shaded region shows the range of projections published in the Monetary Policy Report to the Congress. Monetary Base Growth* and Inflation Targets Percent 12 Actual 9 6 3 Target Inflation Rates 0% 1% 2% 3% 4% 0 1994 94 95 1995 1996 96 97 1997 98 1998 99 1999 00 2000 2001 01 2002 02 2003 03 *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. 04 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-Year Moving Average -4 -8 -4 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 1994 04 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 04 Research Division 10 Federal Reserve Bank of St. Louis updated through 08/18/03 Monetary Trends Implied One-Year Forward Rates Rates on 3-Month Eurodollar Futures Percent, daily data Percent 8 6 1.3 Week Ending: Oct 2003 08/16/02 07/18/03 08/15/03 1.2 Aug 2003 4 1.1 2 1.0 0 2y 3y 5y 7y 10y || || Sep 2003 0.9 06/16 Rates on Selected Federal Funds Futures Contracts 06/30 07/07 07/14 Percent, daily data Percent 1.1 07/28 08/04 08/11 08/18 08/15/2003 Aug 2003 Sep 2003 07/21 Rates on Federal Funds Futures on Selected Dates 1.1 1.0 06/23 1.0 || | Oct 2003 0.9 0.9 0.8 0.8 0.7 0.7 07/11/2003 06/13/2003 06/16 06/23 06/30 07/07 07/14 07/21 07/28 08/04 08/11 08/18 Aug Sep Oct Dec Nov Jan Contract Month Inflation-Indexed Treasury Bonds Inflation-Indexed Treasury Yield Spreads Percent, weekly data Percent, weekly data 4 5 4.5 3 4 30-Year 3.5 2 30-Year 3 10-Year 2.5 10-Year 1 2 0 1.5 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 Inflation-Indexed 30-Year Government Bonds Inflation-Indexed 10-Year Government Bonds Percent, weekly data Percent, weekly data 6 6 5 5 U.S. U.S. Canada 4 4 3 3 2 2 U.K. 1 1999 2000 2001 2002 2003 01/01/1999 01/01/2000 01/01/2001 01/01/2002 01/01/2003 01/01/2004 U.K. 1 1999 2000 2001 2002 2003 01/01/1999 01/01/2000 01/01/2001 01/01/2002 01/01/2003 01/01/2004 Research Division Federal Reserve Bank of St. Louis 11 updated through 08/18/03 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 9497 86 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 Interest Rates Percent 10 8 3-Month T-Bill 6 4 M2 Own MZM Own 2 0 86 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 MZM Velocity and Interest Rate Spread M2 Velocity and Interest Rate Spread Ratio Scale Ratio Scale 3.50 03 16071 2.25 Velocity = Nominal GDP / M2 Velocity = Nominal GDP / MZM 9497 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 11 Interest Rate Spread = 3-Month T-Bill less MZM Own Rate 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 08/18/03 Monetary Trends Gross Domestic Product Percent change from year ago 20 15 10 5 0 1986 86 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 Dashed lines indicate 10-year moving averages. Real Gross Domestic Product Percent change from year ago 15 10 5 0 -5 1986 86 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 Dashed lines indicate 10-year moving averages. Gross Domestic Product Price Index Percent change from year ago 20 15 10 5 0 1986 86 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 Dashed lines indicate 10-year moving averages. M2 Percent change from year ago 20 15 10 5 0 86 1986 87 1987 88 1988 89 1989 90 1990 91 1991 92 1992 93 1993 94 1994 95 1995 96 1996 97 1997 98 1998 99 1999 00 2000 01 2001 02 2002 03 2003 2004 Dashed lines indicate 10-year moving averages. Research Division Federal Reserve Bank of St. Louis 13 updated through 08/18/03 Monetary Trends Bank Credit Percent change from year ago 20 15 10 5 0 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 Investment Securities in Bank Credit at Commercial Banks Percent change from year ago 25 20 15 10 5 0 -5 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 Total Loans and Leases in Bank Credit at Commercial Banks Percent change from year ago 20 15 10 5 0 -5 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 Commercial and Industrial Loans at Commercial Banks Percent change from year ago 20 15 10 5 0 -5 -10 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 Research Division 14 Federal Reserve Bank of St. Louis updated through 08/18/03 Monetary Trends Standard & Poor’s 500 1600 48 1400 42 1200 36 1000 30 Price/Earnings Ratio (right) 800 24 600 18 400 12 Composite Index (left) 200 6 0 0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 Recent Inflation and Long-Term Interest Rates Consumer Price Inflation Rates Long-Term Government Bond Rates Percent change from year ago 2002Q3 2002Q4 2003Q1 2003Q2 Percent May03 Jun03 Apr03 Jul03 United States 1.58 2.25 2.87 2.17 3.96 3.57 3.33 3.98 Canada 2.33 3.79 4.47 2.81 4.90 4.50 4.37 . France 1.75 2.14 2.38 1.92 4.49 3.88 3.93 . Germany 1.14 1.20 1.17 0.87 4.15 3.82 3.62 3.97 Italy 2.41 2.77 2.72 2.67 4.31 4.04 4.13 . -0.87 -0.40 -0.23 -0.24 0.59 0.50 0.49 0.92 1.53 2.56 3.07 3.01 4.47 4.22 4.11 . Japan United Kingdom Inflation and Long-Term Interest Rate Differentials Percent Percent 3 3 Canada U.K. Canada 0 0 U.K. Japan Germany Germany -3 -3 Inflation differential = Foreign inflation less U.S. inflation Long-term rate differential = Foreign rate less U.S. rate -6 Japan -6 14610 2000 14976 2001 15341 2002 15706 2003 16071 14610 2000 14976 2001 15341 2002 15706 2003 16071 Research Division Federal Reserve Bank of St. Louis 15 updated through 08/18/03 Monetary Trends Money Stock Bank Adjusted M1 MZM M2 M3 Credit Monetary Base Reserves MSI M2 1998. 1079.870 3709.460 4207.773 5749.669 4325.717 525.184 84.060 241.553 1999. 1101.495 4170.041 4525.775 6252.402 4578.437 574.181 88.664 257.899 2000. 1103.401 4507.616 4801.194 6841.028 5027.373 607.106 84.511 272.522 2001. 1136.611 5218.970 5221.875 7620.986 5345.578 641.167 85.931 296.258 2002. 1190.256 5886.105 5619.389 8228.818 5593.932 697.071 87.924 319.376 2001 1 1100.135 4855.412 5032.809 7275.901 5272.530 619.676 82.207 285.331 . 2 1116.115 5107.226 5160.071 7542.994 5313.769 629.484 82.722 292.818 . 3 1162.814 5327.136 5291.533 7725.814 5363.259 651.930 90.906 300.508 . 4 1167.377 5586.105 5403.087 7939.235 5432.755 663.578 87.887 306.373 2002 1 1183.762 5724.013 5494.506 8055.002 5411.145 680.264 88.157 311.585 . 2 1181.599 5809.887 5546.291 8137.333 5481.301 692.937 86.979 315.238 . 3 1190.547 5944.733 5668.776 8281.752 5654.944 702.753 86.820 322.266 . 4 1205.117 6065.788 5767.982 8441.184 5828.339 712.330 89.741 328.413 2003 1 1227.840 6160.958 5862.334 8559.355 5947.433 726.820 90.923 334.384 . 2 1255.972 6260.004 5986.618 8688.853 6109.940 738.225 91.824 342.014 2001 Jul 1138.001 5247.612 5232.558 7666.166 5323.585 638.344 84.123 297.028 . Aug 1149.222 5281.126 5265.733 7676.583 5345.576 645.817 83.517 299.264 . Sep 1201.220 5452.671 5376.309 7834.693 5420.615 671.628 105.077 305.233 . Oct 1163.909 5511.502 5362.212 7869.722 5415.650 663.798 91.551 304.237 . Nov 1165.335 5585.291 5402.608 7943.632 5447.829 661.381 86.229 306.399 . Dec 1172.887 5661.523 5444.441 8004.351 5434.785 665.556 85.880 308.482 2002 Jan 1179.038 5682.552 5468.550 8016.074 5408.671 673.713 87.296 310.003 . Feb 1185.171 5737.146 5506.972 8067.869 5416.167 681.914 89.238 312.215 . Mar 1187.077 5752.342 5507.995 8081.063 5408.598 685.165 87.936 312.538 . Apr 1172.605 5750.446 5494.617 8083.141 5433.901 689.008 88.352 312.458 . May 1183.278 5818.325 5557.095 8150.281 5482.653 692.736 86.588 315.712 . Jun 1188.913 5860.890 5587.162 8178.576 5527.348 697.068 85.998 317.545 . Jul 1195.803 5908.516 5634.983 8224.290 5580.103 701.032 86.100 320.043 . Aug 1184.532 5950.535 5672.855 8290.107 5662.376 702.878 86.382 322.451 . Sep 1191.305 5975.149 5698.489 8330.860 5722.354 704.350 87.978 324.304 . Oct 1202.680 5977.528 5736.336 8341.483 5757.151 710.664 89.827 326.546 . Nov 1202.252 6087.124 5776.231 8463.682 5835.969 712.472 89.818 328.843 . Dec 1210.419 6132.711 5791.378 8518.387 5891.896 713.853 89.578 329.850 2003 Jan 1213.013 6131.419 5820.994 8518.273 5885.756 719.528 89.508 331.950 . Feb 1233.462 6172.621 5875.886 8566.060 5962.820 728.657 91.901 335.139 . Mar 1237.044 6178.835 5890.122 8593.732 5993.723 732.276 91.360 336.062 . Apr 1237.412 6185.526 5913.371 8608.874 6025.309 736.488 92.370 337.923 . May 1258.330 6260.521 6000.085 8697.388 6124.795 738.668 91.495 342.593 . Jun 1272.173 6333.965 6046.398 8760.296 6179.716 739.518 91.608 345.526 . Jul 1277.325 6434.333 6094.284 8919.459 6219.222 741.179 93.448 348.616 *All values are given in billions of dollars. Research Division 16 Federal Reserve Bank of St. Louis updated through 08/18/03 Monetary Trends Federal Discount Primary Prime 3-mo Funds Rate Credit Rate Rate CDs Treasury Yields 3-mo 3-yr Corporate 10-yr Aaa Bonds S&L Aaa Bonds Conventional Mortgage 1998. 5.35 4.92 . 8.35 5.47 4.91 5.14 5.26 6.53 4.93 6.94 1999. 4.97 4.62 . 7.99 5.33 4.78 5.49 5.64 7.04 5.28 7.43 2000. 6.24 5.73 . 9.23 6.46 6.00 6.22 6.03 7.62 5.58 8.06 2001. 3.89 3.41 . 6.92 3.69 3.47 4.08 5.02 7.08 5.01 6.97 2002. 1.67 1.17 . 4.68 1.73 1.63 3.10 4.61 6.49 4.87 6.54 2001 1 5.59 5.11 . 8.62 5.26 4.95 4.64 5.05 7.08 5.03 7.01 . 2 4.33 3.83 . 7.34 4.10 3.75 4.43 5.27 7.22 5.11 7.13 . 3 3.50 3.06 . 6.57 3.34 3.24 3.93 4.98 7.11 4.95 6.97 . 4 2.13 1.64 . 5.16 2.06 1.94 3.33 4.77 6.92 4.97 6.78 2002 1 1.73 1.25 . 4.75 1.82 1.76 3.75 5.08 6.62 5.02 6.97 . 2 1.75 1.25 . 4.75 1.83 1.75 3.77 5.10 6.71 5.01 6.81 . 3 1.74 1.25 . 4.75 1.76 1.67 2.62 4.26 6.35 4.72 6.29 . 4 1.44 0.94 . 4.45 1.49 1.36 2.27 4.01 6.28 4.71 6.08 2003 1 1.25 . 2.25 4.25 1.26 1.18 2.07 3.92 6.00 4.60 5.83 . 2 1.25 . 2.23 4.24 1.17 1.06 1.77 3.62 5.31 4.28 5.51 7.13 2001 Jul 3.77 3.25 . 6.75 3.66 3.59 4.31 5.24 7.13 5.04 . Aug 3.65 3.16 . 6.67 3.48 3.44 4.04 4.97 7.02 4.89 6.95 . Sep 3.07 2.77 . 6.28 2.87 2.69 3.45 4.73 7.17 4.93 6.82 . Oct 2.49 2.02 . 5.53 2.31 2.20 3.14 4.57 7.03 4.89 6.62 . Nov 2.09 1.58 . 5.10 2.03 1.91 3.22 4.65 6.97 4.85 6.66 . Dec 1.82 1.33 . 4.84 1.83 1.72 3.62 5.09 6.77 5.18 7.07 2002 Jan 1.73 1.25 . 4.75 1.74 1.68 3.56 5.04 6.55 5.05 7.00 . Feb 1.74 1.25 . 4.75 1.82 1.76 3.55 4.91 6.51 4.93 6.89 . Mar 1.73 1.25 . 4.75 1.91 1.83 4.14 5.28 6.81 5.09 7.01 . Apr 1.75 1.25 . 4.75 1.87 1.75 4.01 5.21 6.76 5.09 6.99 . May 1.75 1.25 . 4.75 1.82 1.76 3.80 5.16 6.75 5.03 6.81 . Jun 1.75 1.25 . 4.75 1.81 1.73 3.49 4.93 6.63 4.92 6.65 . Jul 1.73 1.25 . 4.75 1.79 1.71 3.01 4.65 6.53 4.81 6.49 . Aug 1.74 1.25 . 4.75 1.73 1.65 2.52 4.26 6.37 4.78 6.29 . Sep 1.75 1.25 . 4.75 1.76 1.66 2.32 3.87 6.15 4.58 6.09 . Oct 1.75 1.25 . 4.75 1.73 1.61 2.25 3.94 6.32 4.66 6.11 . Nov 1.34 0.83 . 4.35 1.39 1.25 2.32 4.05 6.31 4.77 6.07 . Dec 1.24 0.75 . 4.25 1.34 1.21 2.23 4.03 6.21 4.70 6.05 2003 Jan 1.24 . . 4.25 1.29 1.19 2.18 4.05 6.17 4.72 5.92 . Feb 1.26 . 2.25 4.25 1.27 1.19 2.05 3.90 5.95 4.57 5.84 . Mar 1.25 . 2.25 4.25 1.23 1.15 1.98 3.81 5.89 4.51 5.75 . Apr 1.26 . 2.25 4.25 1.24 1.15 2.06 3.96 5.74 4.60 5.81 . May 1.26 . 2.25 4.25 1.22 1.09 1.75 3.57 5.22 4.16 5.48 . Jun 1.22 . 2.20 4.22 1.04 0.94 1.51 3.33 4.97 4.07 5.23 . Jul 1.01 . 2.00 4.00 1.05 0.92 1.93 3.98 5.49 4.59 5.63 *All values are given as a percent at an annual rate. Research Division Federal Reserve Bank of St. Louis 17 updated through 08/18/03 Monetary Trends M1 MZM M2 M3 Percent change at an annual rate 1998. 0.99 11.67 7.29 10.36 1999. 2.00 12.42 7.56 8.74 2000. 0.17 8.10 6.09 9.41 2001. 3.01 15.78 8.76 11.40 2002. 4.72 12.78 7.61 7.98 2001 1 2.71 18.61 10.65 13.24 . 2 5.81 20.75 10.11 14.68 . 3 16.74 17.22 10.19 9.69 . 4 1.57 19.45 8.43 11.05 2002 1 5.61 9.88 6.77 5.83 . 2 -0.73 6.00 3.77 4.09 . 3 3.03 9.28 8.83 7.10 . 4 4.90 8.15 7.00 7.70 2003 1 7.54 6.28 6.54 5.60 . 2 9.16 6.43 8.48 6.05 2001 Jul 12.97 12.42 7.94 6.03 . Aug 11.83 7.66 7.61 1.63 . Sep 54.30 38.98 25.20 24.72 . Oct -37.27 12.95 -3.15 5.37 . Nov 1.47 16.07 9.04 11.27 . Dec 7.78 16.38 9.29 9.17 2002 Jan 6.29 4.46 5.31 1.76 . Feb 6.24 11.53 8.43 7.75 . Mar 1.93 3.18 0.22 1.96 . Apr -14.63 -0.40 -2.91 0.31 . May 10.92 14.16 13.64 9.97 . Jun 5.71 8.78 6.49 4.17 . Jul 6.95 9.75 10.27 6.71 . Aug -11.31 8.53 8.07 9.60 . Sep 6.86 4.96 5.42 5.90 . Oct 11.46 0.48 7.97 1.53 . Nov -0.43 22.00 8.35 17.58 . Dec 8.15 8.99 3.15 7.76 -0.02 2003 Jan 2.57 -0.25 6.14 . Feb 20.23 8.06 11.32 6.73 . Mar 3.48 1.21 2.91 3.88 . Apr 0.36 1.30 4.74 2.11 . May 20.29 14.55 17.60 12.34 . Jun 13.20 14.08 9.26 8.68 . Jul 4.86 19.02 9.50 21.80 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: M2 minus small-denomination time deposits, plus institutional money market mutual funds. The label MZM was coined by William Poole (1991) for this aggregate, proposed earlier by Motley (1988). M2: M1 plus savings deposits (including money market deposit accounts) and small-denomination (less than $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments of less than $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, 1996b, 2001). 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 series, a 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). 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; additional data are available 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 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: MZM, or “Money, Zero Maturity,” includes the zero maturity, or immediately available, components of M3. MZM equals M2 minus smalldenomination time deposits, plus institutional money market mutual funds (that is, the money market mutual funds included in M3 but excluded from M2). 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, Research Division Federal Reserve Bank of St. Louis 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 Department 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/ fred/data/wkly.html. See also Federal Reserve Bulletin, table 1.35. The 30-year constant maturity series was discontinued by the Treasury Department 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 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 Humphrey-Hawkins Act testimony each year. Beginning February 2000, the FOMC began using the personal consumption expenditures (PCE) price index to report its inflation range and therefore is not 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 ∆MBt* = 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 ∆MBt* 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) × 4 × 100, where yt is the log of real GDP. The fouryear 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, 19 Monetary Trends as estimated by the Federal Reserve Board staff. These estimates are imprecise, at best. Sweep program data are available 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 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)], 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. Federal Reserve Bank of Philadelphia Survey of Professional Forecasters inflation expectations. 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 Bonds are yields on the most recently issued inflation-indexed securities of 10- and 30-year original maturities. Inflation-Indexed Treasury Yield Spreads equal, for 10- and 30-year maturities, the difference between the yields on the most recently issued inflation-indexed securities and the unadjusted bond yields of similar maturity. Inflation-Indexed 30-Year Government Bonds shows the yield of an inflation-indexed bond that is scheduled to mature in approximately (but not greater than) 30 years. The current bond for Canada has a maturity date of 12/01/2031, the current U.K. bond has a maturity date of 7/22/2030, and the current U.S. bond has a maturity date of 4/15/2032. Inflation-Indexed 10-Year Government Bonds shows the yield of an inflationindexed bond that is scheduled to mature in approximately (but not greater than) 10 years. The current U.K. bond has a maturity date of 8/16/2013 and the current U.S. bond has a maturity date of 7/15/2013. Federal Reserve Bank of St. Louis Adjusted monetary base and adjusted reserves, monetary services index, MZM own rate, one-year forward rates. 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. ____ and ____(2001). “Retail Sweep Programs and Bank Reserves, 1994-1999,” Federal Reserve Bank of St. Louis Review, January/February, pp. 51-72. Page 13: Real Gross Domestic Product is GDP as measured in chained 1996 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 1996 dollars. 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. 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. Nelson, Charles R. and Andrew F. Siegel (1987). “Parsimonious Modeling of Yield Curves,” Journal of Business, October, pp. 473-89. Sources Bank of Canada Canadian inflation-linked bond yields. 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. Bank of England U.K. inflation-linked bond yields. Sharpe, William F. (1997). Macro-Investment Analysis, on-line textbook available at www.stanford.edu/~wfsharpe/mia/mia.htm. 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. Shiller, Robert (1990). “The Term Structure of Interest Rates,” Handbook of Monetary Economics, vol. 1, B. Friedman and F. Hahn, eds., pp. 627-722. 20 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. inflation-indexed 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. ____ , 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. ____(1993). “Specification and Analysis of a Monetary Policy Rule for Japan,” Bank of Japan Monetary and Economic Studies, November, pp. 1-45. Taylor, John B. (1993). “Discretion versus Policy Rules in Practice,” CarnegieRochester Conference Series on Public Policy, vol. 39, pp. 195-214. Note: Articles from this Bank’s Review are available on the Internet at research.stlouisfed.org/publications/review/. Research Division Federal Reserve Bank of St. Louis