Federal Reserve Challenge Presentation<br />Federal Reserve Bank of New York – November 20, 2009<br />
Agenda<br /><ul><li>Global Economic Conditions
Domestic Economic Conditions
The Real Estate Crisis
Financial Markets
Forecast
Contemporary Monetary Policy Challenges
Monetary Policy Recommendation
Draft FOMC Policy Directive
Question & Answer Session</li></ul>Federal Reserve Challenge<br />
International Economic Conditions<br />Source: International Monetary Fund<br />Federal Reserve Challenge<br />
International Economic Conditions<br />Federal Reserve Challenge<br />
International Economic Conditions<br />Source: U.S. Department of Commerce Bureau of Economic Analysis, U.S. Census Bureau...
International Economic Conditions<br />Source: Netherlands Bureau of Economic Policy Analysis<br />Federal Reserve Challen...
International Economic Conditions<br />Amounts Outstanding<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve...
International Economic Conditions<br />Source: U.S. Census Bureau, Office of Management and Budget<br />Federal Reserve Ch...
International Economic Conditions<br />Sources: European Central Bank, Norges Bank, Sveriges Riksbank, Central Bank of Rus...
International Economic Conditions<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserv...
International Economic Conditions<br />Source: Federal Reserve Bank of St. Louis, Federal Reserve Bank of New York<br />Fe...
International Economic Conditions<br />Up 0.25%<br />Up 0.25%<br />Up 0.25%<br />Source: Norges Bank, Reserve Bank of Aust...
International Economic Conditions<br />Central Bank Cooperation<br />Federal Reserve Challenge<br />
International Economic Conditions<br />Source:Organization for Economic Cooperation & Development<br />Federal Reserve Cha...
Domestic Economic Conditions<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challe...
Domestic Economic Conditions<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challe...
Domestic Economic Conditions<br />Source: U.S. Department of Labor Bureau of Labor Statistics, Automatic Data Processing<b...
Domestic Economic Conditions<br />Source: U.S. Department of Labor :Bureau of  Labor Statistics<br />Federal Reserve Chall...
Domestic Economic Conditions<br />Monthly Mass Layoffs<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<b...
Domestic Economic Conditions<br />Employment Cost Index (%∆quarterly)<br />Source: U.S. Department of Labor: Bureau of  La...
Domestic Economic Conditions<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challe...
Domestic Economic Conditions<br />Source: U.S. Department of Commerce: Bureau of Economic Analysis<br />Federal Reserve Ch...
Domestic Economic Conditions<br />Source: U.S. Department of Commerce Census Bureau<br />Source: U.S. Department of Commer...
Domestic Economic Conditions<br />Source: U.S. Department of Commerce: Bureau of Economic Analysis<br />Federal Reserve Ch...
Domestic Economic Conditions<br />Source: U.S. Department of Commerce: Bureau of Economic Analysis<br />Federal Reserve Ch...
Domestic Economic Conditions<br />Sources: The Conference Board, University of Michigan Survey Research Center<br />Federa...
Domestic Economic Conditions<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Cha...
Domestic Economic Conditions<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Cha...
Domestic Economic Conditions<br />Non-residential Investment %  Contribution to GDP Growth<br />Source: U.S. Department of...
Domestic Economic Conditions<br />Sources: Congressional Budget Office, U.S. Department of Labor Bureau of Labor Statistic...
Domestic Economic Conditions<br />Inventory to Sales Ratio<br />Source: U.S. Department of Commerce Bureau of Economic Ana...
Domestic Economic Conditions<br />Federal Reserve Board (G.17)    Institute for Supply Management<br />Federal Reserve Cha...
Domestic Economic Conditions<br />U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challenge<br />
Domestic Economic Conditions<br />Core Inflation (%∆ y/y)<br />Source: U.S. Department of Labor: Bureau of Labor Statistic...
Domestic Economic Conditions<br />Source: Federal Reserve Board (H.3, H.6)<br />Federal Reserve Challenge<br />
Real Estate Markets<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
Real Estate Markets<br />Sources: U.S. Department of Commerce: Census Bureau<br />Federal Reserve Challenge<br />
Real Estate Markets<br />Source: National Association of Realtors <br />Federal Reserve Challenge<br />
Real Estate Markets<br />Source: Federal Home Loan Mortgage Corporation<br />Federal Reserve Challenge<br />
Real Estate Markets<br />Source: U.S. Department of Commerce, CensusBureau<br />Federal Reserve Challenge<br />
Real Estate Markets<br />Source: Standard and Poors<br />Federal Reserve Challenge<br />
Real Estate Markets<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
Real Estate Markets<br />Source: Federal Deposit Insurance Corporation<br />Federal Reserve Challenge<br />
Financial Markets<br />1 Month OIS /LIBOR Spread<br />Source: Reuters, Chicago Board of Trade<br />Federal Reserve Challen...
Financial Markets<br />Source: Federal Reserve Bank of New York, Reuters<br />Federal Reserve Challenge<br />
Financial Markets<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
Financial Markets<br />Source: Reuters<br />Federal Reserve Challenge<br />
Financial Markets<br />Source: Federal Deposit Insurance Corporation<br />Federal Reserve Challenge<br />
Financial Markets<br />Source: Federal Reserve Bank of St. Louis <br />Federal Reserve Challenge<br />
Financial Markets<br />Source: Federal Reserve Board <br />Federal Reserve Challenge<br />
Financial Markets<br />Source: U.S. Department of Commerce Bureau of Economic Analysis, Federal Reserve Board (G.19)<br />...
Financial Markets<br />Source: Federal Reserve Bank of St. Louis, U.S. Department of the Treasury<br />Federal Reserve Cha...
Financial Markets<br />Federal Reserve Challenge<br />
Financial Markets<br />Source: Federal Reserve Bank of St. Louis <br />Federal Reserve Challenge<br />
Financial Markets<br />Source: Federal Reserve Bank of St. Louis <br />Federal Reserve Challenge<br />
Financial Markets<br />Source: Federal Reserve Board, Macroeconomic Advisers, Haver Analytics<br />Federal Reserve Challen...
Monetary Policy Discussion<br />GDP (%∆y/y)<br />Unemployment Rate (%)<br />Core PCE Deflator<br />Source: Macroeconomic A...
Monetary Policy Discussion<br />27% of ARRA <br />Aggregate Demand<br />Federal Reserve Challenge<br />
Monetary Policy Discussion<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
Blockage<br />Opening<br />Banks<br />Fed <br />Facilities<br />Libor<br />Commercial & Industrial<br />Consumer, Mortgage...
Monetary Policy Discussion<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
Blockage<br />Opening<br />Action to Revive the Commercial Paper Market: <br />…To Temporarily Inserting Two Bypasses<br /...
Monetary Policy Discussion<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
Monetary Policy Discussion<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
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Transcript of "Fed Challenge09"

  1. 1. Federal Reserve Challenge Presentation<br />Federal Reserve Bank of New York – November 20, 2009<br />
  2. 2. Agenda<br /><ul><li>Global Economic Conditions
  3. 3. Domestic Economic Conditions
  4. 4. The Real Estate Crisis
  5. 5. Financial Markets
  6. 6. Forecast
  7. 7. Contemporary Monetary Policy Challenges
  8. 8. Monetary Policy Recommendation
  9. 9. Draft FOMC Policy Directive
  10. 10. Question & Answer Session</li></ul>Federal Reserve Challenge<br />
  11. 11. International Economic Conditions<br />Source: International Monetary Fund<br />Federal Reserve Challenge<br />
  12. 12. International Economic Conditions<br />Federal Reserve Challenge<br />
  13. 13. International Economic Conditions<br />Source: U.S. Department of Commerce Bureau of Economic Analysis, U.S. Census Bureau<br />Federal Reserve Challenge<br />
  14. 14. International Economic Conditions<br />Source: Netherlands Bureau of Economic Policy Analysis<br />Federal Reserve Challenge<br />
  15. 15. International Economic Conditions<br />Amounts Outstanding<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
  16. 16. International Economic Conditions<br />Source: U.S. Census Bureau, Office of Management and Budget<br />Federal Reserve Challenge<br />
  17. 17. International Economic Conditions<br />Sources: European Central Bank, Norges Bank, Sveriges Riksbank, Central Bank of Russia, People’s Bank of ChinaKorea Federation of Banks, Financial Times<br />Federal Reserve Challenge<br />
  18. 18. International Economic Conditions<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  19. 19. International Economic Conditions<br />Source: Federal Reserve Bank of St. Louis, Federal Reserve Bank of New York<br />Federal Reserve Challenge<br />
  20. 20. International Economic Conditions<br />Up 0.25%<br />Up 0.25%<br />Up 0.25%<br />Source: Norges Bank, Reserve Bank of Australia, Bank of Israel<br />Federal Reserve Challenge<br />
  21. 21. International Economic Conditions<br />Central Bank Cooperation<br />Federal Reserve Challenge<br />
  22. 22. International Economic Conditions<br />Source:Organization for Economic Cooperation & Development<br />Federal Reserve Challenge<br />
  23. 23. Domestic Economic Conditions<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challenge<br />
  24. 24. Domestic Economic Conditions<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challenge<br />
  25. 25. Domestic Economic Conditions<br />Source: U.S. Department of Labor Bureau of Labor Statistics, Automatic Data Processing<br />Federal Reserve Challenge<br />
  26. 26. Domestic Economic Conditions<br />Source: U.S. Department of Labor :Bureau of Labor Statistics<br />Federal Reserve Challenge<br />
  27. 27. Domestic Economic Conditions<br />Monthly Mass Layoffs<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challenge<br />
  28. 28. Domestic Economic Conditions<br />Employment Cost Index (%∆quarterly)<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challenge<br />
  29. 29. Domestic Economic Conditions<br />Source: U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challenge<br />
  30. 30. Domestic Economic Conditions<br />Source: U.S. Department of Commerce: Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  31. 31. Domestic Economic Conditions<br />Source: U.S. Department of Commerce Census Bureau<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  32. 32. Domestic Economic Conditions<br />Source: U.S. Department of Commerce: Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  33. 33. Domestic Economic Conditions<br />Source: U.S. Department of Commerce: Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  34. 34. Domestic Economic Conditions<br />Sources: The Conference Board, University of Michigan Survey Research Center<br />Federal Reserve Challenge<br />
  35. 35. Domestic Economic Conditions<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  36. 36. Domestic Economic Conditions<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  37. 37. Domestic Economic Conditions<br />Non-residential Investment % Contribution to GDP Growth<br />Source: U.S. Department of Commerce Bureau of Economic Analysis, Bureau of the Census<br />Federal Reserve Challenge<br />
  38. 38. Domestic Economic Conditions<br />Sources: Congressional Budget Office, U.S. Department of Labor Bureau of Labor Statistics, U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  39. 39. Domestic Economic Conditions<br />Inventory to Sales Ratio<br />Source: U.S. Department of Commerce Bureau of Economic Analysis, Bureau of the Census<br />Federal Reserve Challenge<br />
  40. 40. Domestic Economic Conditions<br />Federal Reserve Board (G.17) Institute for Supply Management<br />Federal Reserve Challenge<br />
  41. 41. Domestic Economic Conditions<br />U.S. Department of Labor: Bureau of Labor Statistics<br />Federal Reserve Challenge<br />
  42. 42. Domestic Economic Conditions<br />Core Inflation (%∆ y/y)<br />Source: U.S. Department of Labor: Bureau of Labor Statistics, U.S. Department of Commerce: Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  43. 43. Domestic Economic Conditions<br />Source: Federal Reserve Board (H.3, H.6)<br />Federal Reserve Challenge<br />
  44. 44. Real Estate Markets<br />Source: U.S. Department of Commerce Bureau of Economic Analysis<br />Federal Reserve Challenge<br />
  45. 45. Real Estate Markets<br />Sources: U.S. Department of Commerce: Census Bureau<br />Federal Reserve Challenge<br />
  46. 46. Real Estate Markets<br />Source: National Association of Realtors <br />Federal Reserve Challenge<br />
  47. 47. Real Estate Markets<br />Source: Federal Home Loan Mortgage Corporation<br />Federal Reserve Challenge<br />
  48. 48. Real Estate Markets<br />Source: U.S. Department of Commerce, CensusBureau<br />Federal Reserve Challenge<br />
  49. 49. Real Estate Markets<br />Source: Standard and Poors<br />Federal Reserve Challenge<br />
  50. 50. Real Estate Markets<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
  51. 51. Real Estate Markets<br />Source: Federal Deposit Insurance Corporation<br />Federal Reserve Challenge<br />
  52. 52. Financial Markets<br />1 Month OIS /LIBOR Spread<br />Source: Reuters, Chicago Board of Trade<br />Federal Reserve Challenge<br />
  53. 53. Financial Markets<br />Source: Federal Reserve Bank of New York, Reuters<br />Federal Reserve Challenge<br />
  54. 54. Financial Markets<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
  55. 55. Financial Markets<br />Source: Reuters<br />Federal Reserve Challenge<br />
  56. 56. Financial Markets<br />Source: Federal Deposit Insurance Corporation<br />Federal Reserve Challenge<br />
  57. 57. Financial Markets<br />Source: Federal Reserve Bank of St. Louis <br />Federal Reserve Challenge<br />
  58. 58. Financial Markets<br />Source: Federal Reserve Board <br />Federal Reserve Challenge<br />
  59. 59. Financial Markets<br />Source: U.S. Department of Commerce Bureau of Economic Analysis, Federal Reserve Board (G.19)<br />Federal Reserve Challenge<br />
  60. 60. Financial Markets<br />Source: Federal Reserve Bank of St. Louis, U.S. Department of the Treasury<br />Federal Reserve Challenge<br />
  61. 61. Financial Markets<br />Federal Reserve Challenge<br />
  62. 62. Financial Markets<br />Source: Federal Reserve Bank of St. Louis <br />Federal Reserve Challenge<br />
  63. 63. Financial Markets<br />Source: Federal Reserve Bank of St. Louis <br />Federal Reserve Challenge<br />
  64. 64. Financial Markets<br />Source: Federal Reserve Board, Macroeconomic Advisers, Haver Analytics<br />Federal Reserve Challenge<br />
  65. 65. Monetary Policy Discussion<br />GDP (%∆y/y)<br />Unemployment Rate (%)<br />Core PCE Deflator<br />Source: Macroeconomic Advisors<br />Federal Reserve Challenge<br />
  66. 66. Monetary Policy Discussion<br />27% of ARRA <br />Aggregate Demand<br />Federal Reserve Challenge<br />
  67. 67. Monetary Policy Discussion<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
  68. 68. Blockage<br />Opening<br />Banks<br />Fed <br />Facilities<br />Libor<br />Commercial & Industrial<br />Consumer, Mortgage Loans<br />Deposits<br />Banks w/<br />Excess Loan<br />Demand<br />Commercial, Consumer,<br />Mortgage Loans<br />Savers &<br />Investors<br />Securities-<br />Funded<br />Lending<br />Borrowers<br />Financial-Issued ABS<br />Commercial Paper & Bonds<br />Direct Investment<br />Commercial Paper, Bonds<br />Securities<br />Market<br />
  69. 69. Monetary Policy Discussion<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
  70. 70. Blockage<br />Opening<br />Action to Revive the Commercial Paper Market: <br />…To Temporarily Inserting Two Bypasses<br />Commercial, Consumer,<br />Mortgage Loans<br />Savers &<br />Investors<br />Securities-<br />Funded Loan<br />Originators<br />Borrowers<br />ABS Paper<br />Treasuries<br />Fed &<br />Treasury<br />Commercial Paper<br />Commercial<br /> Paper ABS<br />Insurance<br />Directly Buy Commercial Paper<br />Commercial Paper (Direct)<br />Securities<br />Market<br />Money <br />Market Funds<br />Buy Commercial Paper<br />
  71. 71. Monetary Policy Discussion<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
  72. 72. Monetary Policy Discussion<br />Source: Federal Reserve Board (H.4.1)<br />Federal Reserve Challenge<br />
  73. 73. Monetary Policy Discussion<br />Federal Reserve Challenge<br />
  74. 74. Monetary Policy Recommendation<br />Federal Reserve Challenge<br />
  75. 75. Monetary Policy Recommendation<br />We recommend that the Federal Open Market Committee maintain the target range for the Federal Funds rate at 0-0.25% at its next meeting<br />Federal Reserve Challenge<br />
  76. 76. “V” Shaped Recovery<br />Federal Reserve Challenge<br />Rapid rebound in GDP Growth<br />Continued Financial Improvement<br />Credit Growth<br />Reduction in Excess Bank Reserves<br />Rapid growth in IP, Capacity Utilization, and Core PCE<br />Strong Nonfarm Payroll Growth beginning within a few months<br />Would require rapid monetary policy tightening<br />Rate increases of large magnitudes (50bp or more)<br />Possible emergency FOMC meetings to accelerate tightening cycle<br />
  77. 77. “L” Shaped Recovery<br />Federal Reserve Challenge<br />Continued weakness in credit and monetary growth<br />Sluggish growth in industrial production, capacity utilization, and GDP<br />Weak consumer spending<br />Nonfarm payrolls continue to improve slowly<br />Consumer Confidence & Sentiment Remain Low<br />Monetary policymakers would have time to enact a measured exit strategy<br />Small rate increases<br />Rate increases spread over more than one meeting<br />
  78. 78. “W” Shaped Recovery<br />Federal Reserve Challenge<br />Recovery falters, possibly due to another financial or commodity price shock<br />Mix of positive and negative indicator releases become increasingly negative<br />Consumer and Business confidence falls<br />Nonfarm payroll numbers rapidly deteriorate<br />Deflation becomes a significant risk<br />Contraction begins while monetary policy is still accomodative<br />Re-engage in credit easing, expand to new types of assets<br />Expand lending facilities and create new ones<br />Set negative nominal interest rate for excess reserves<br />
  79. 79. Recommendation for Policy Directive<br />Please turn to the FOMC Policy Directive Packet<br />Federal Reserve Challenge<br />
  80. 80. Monetary Policy Recommendation<br />Expected Unemployment Rate (%)<br />Federal Reserve Challenge<br />

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